German Economic Institutes Criticize ECB

A group of leading think tanks in Germany have cut growth forecasts for the country and warned of recession.

The economic institutes said Europe’s biggest economy would only grow 1% next year instead of the 2% they had been expecting six months ago.

But this assumes that the crisis in the eurozone does not worsen.

They also criticised the European Central Bank’s latest initiative to ward off the crisis, saying its debt purchases risked fuelling inflation.

Last month the ECB unveiled plans to buy up the government debts of struggling eurozone members, but only if those governments first signed up to a rescue package, including strict conditions on cutting their overspending and reforming their economies.

“This process could be triggered by the ECB effectively providing monetary financing for states,” according to the semi-annual report by the four think tanks, Ifo in Munich, IFW in Kiel, IWH in Halle and RWI in Essen.

“Europe’s citizens and players in the markets may lose trust in the ECB’s ability to ensure long-term price stability as a result.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza