Mario Draghi Needs to Present a Bolder Vision for an Exit Strategy

In its first meeting after the summer break, the European Central Bank (ECB) decided not to make any changes to its current interest rate policy while also halving its government bond purchases from October onwards. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW), offers his view on the decision.

“The ECB has managed to limit its future scope unnecessarily by making too many prior commitments. The first interest rate hike not coming before September 2019 and a full repurchase of maturing securities for an undetermined period – all of this is set to condemn the ECB to almost total passivity when it comes to monetary policy decisions until the end of Mario Draghi’s presidency.

When the current ECB president leaves office, he will be passing on to his successor an unenviable task. If faced with an economic downturn when he or she enters office, his successor will have almost no room to manoeuvre in terms of conventional monetary policy. The new president will also be taking over the helm of a central bank that has become by far the most important creditor for highly-indebted countries in the Eurozone. But Mario Draghi still has another year in office ahead of him and could make things easier for his successor by presenting the markets with a bolder vision for the ECB’s future exit strategy.”

For further information please contact

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-149, E-mail friedrich.heinemann@zew.de