Interview: Criticism of the ECB ‘ill founded’

Concerning opinions expressed about the European Central Bank (ECB) by newly elected French President Nicolas Sarkozy, Paul de Grauwe, professor at Leuven University, warns that such criticism could endanger the monetary union, in an interview with EURACTIV.

During the French presidential campaign, the ECB has come under fire by Nicolas Sarkozy, who criticised its interest rate policy, saying that it focused too much on inflation and too little on growth, and also questioned its independent status. Eurozone finance ministers dismissed the French criticism at a Eurogroup meeting on 7 May 2007 and urged the President-elect to respect the ECB’s independence.

In an interview with EURACTIV, Professor de Grauwe argues that Sarkozy’s criticism is “ill-founded”, even “dangerous”. He explains that “none of the problems France is facing can be tackled by the ECB or looser monetary policies”. Moreover, the academic warns that such criticism is dangerous, because if taken seriously it could “endanger the monetary union”.

On the issue of a possible UK entry into the eurozone, Professor de Grauwe argues that since the UK is “not very much integrated with the rest of the eurozone”, it therefore cannot “expect large economic benefits from having the same currency”. On the other side, there is also a risk that “the UK in the eurozone will complicate policymaking in the zone even more”.

The new EU member states that joined the EU in 2004 and in 2007 are expected to join the monetary union. So far, only Slovenia has adopted the euro, but others are expected to follow. However, de Grauwe thinks that their “economic impact on the eurozone will remain small in the near term”, unless they take on a “nationalistic attitude on interest rate policies”.

Speaking on financial services issues, de Grauwe speaks out in favour of including the ‘cost of cash’ in the Commission’s impact assessment. He argues that “the cost of cash is a multiple of the cost of cards”. However, he goes on to explain “it is not transparent” and therefore “consumers are unaware of the high cost of cash”. 

To read the full interview with Professor de Grauwe, please click here.

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