The ECB Demonstrates Its Independence to Rome

As expected, the European Central Bank (ECB) has not made any changes to its interest rate policy in its latest decision. However, it has now set a timetable for phasing out its asset purchase programme. The ECB expects to halve its net asset purchases to 15 billion euros per month as of October as well as to discontinue them completely by the end of the year. This latest decision is, however, subject to the condition that incoming inflation data matches the ECB’s inflation expectations. 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 matter.

“The ECB Governing Council has chosen the right time to announce the beginning of the phasing out of the asset purchase programme. Representatives of the new Italian government have recently indicated through various statements that they are counting on the ECB’s support to solve the Italian debt problem.

Against this backdrop, the ECB has finally sent a credible signal to the Eurozone that it will not allow its monetary policy decisions to be dictated by any threats coming from the Italian government. Otherwise, the impression would have intensified that monetary policy is being driven by fiscal policy. With its latest decision, the ECB has demonstrated its independence to Rome.”

For further information please contact:

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