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ECONOMY

Bundesbank boss: ECB no lender of last resort

The European Central Bank should not act as lender of last resort for struggling eurozone countries, the head of Germany's central bank said on Tuesday, warning it could destroy its independence.

Bundesbank boss: ECB no lender of last resort
Photo: DPA

Speaking at a conference in Berlin, Bundesbank President Jens Weidmann also said he was confident that both Spain and Italy could manage their current difficulties without recourse to outside aid.

“There are compelling reasons why we should stick to the independence of the central bank, especially in difficult times,” Weidmann said, according to the text of a speech provided by his office.

The ECB “does not have the mandate – it is even forbidden – to finance the budgets of member states,” the central banker added.

“If it took on a lender of last resort role for highly indebted member states, it would overshoot its mandate and call into question its independence,” Weidmann said. “There would be significant stability risks attached to this path.”

Pressure on the ECB to step in and backstop the debts of weaker member states has increased amid a crippling economic crisis that threatens to tip the 17-nation zone into recession. But the ECB has steadfastly refused to go further than their current programme, already controversial, of buying the bonds of distressed countries to help ease the pressure on them.

Two top German central bankers, former Bundesbank chief Axel Weber and ECB chief economist Jürgen Stark, have already stepped down in protest at the bond-buying programme, saying it compromised the ECB’s cherished independence.

Weidmann later received the backing of German Finance Minister Wolfgang Schäuble who told parliament: “We will do everything necessary to combat the dangers for the stability of the euro as a whole.

“But only in such a way to ensure that the common (euro) currency remains a stable currency … a stable currency with an independent central bank and a central bank that is not available to finance states,” said Schäuble to loud applause.

Turning to the domestic economy, central bank chief Weidmann said: “I currently do not see a recession in Germany. “However, all forecasts have an unusually high degree of uncertainty attached to them. We will only be spared a recession if the current crisis of confidence does not escalate further,” he cautioned.

He said Germany had a responsibility, as Europe’s top economy, “to act as an anchor of stability in the European monetary union.”

Schäuble also echoed these sentiments, saying that the German economy is “still strong” despite the crisis. “We are still the growth motor in Europe. We are still the stability anchor in Europe,” the minister said.

AFP/mry

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ECONOMY

‘Tougher times’: Sweden’s economy to slow next year

Consumers in Sweden are set to crimp spending over the rest of the year, pushing the country into an economic slowdown, Sweden's official economic forecaster has warned in its latest prognosis.

'Tougher times': Sweden's economy to slow next year

A combination of record high energy prices over the winter, rising interest rates, and inflation at around 10 percent, is set to hit household spending power over the autumn and winter, leading to lower sales for businesses and dragging economic growth down to just 0.5 percent next year. This is down from the 1.2 percent the institute had forecast for 2023 in its spring forecast. 

“I don’t want to be alarmist,” Ylva Hedén Westerdahl, forecasting head at the Swedish National Institute of Economic Research, said at a press conference announcing the new forecast. “We don’t expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more. But having said that, people who don’t have a job will find it tougher to enter the labour market.” 

She said that a shortage of gas in Europe over the winter, will push electricity prices in Sweden to twice the levels seen last winter, while the core interest rate set by Sweden’s Riksbank is set to rise to two percent. 

As a result, Sweden’s unemployment rate will rise slightly to 7.8 percent next year, from 7.7 percent in 2022, which is 0.3 percentage points higher than the institute had previously forecast. 

On the plus side, Westerdahl said that she expected the Riksbank’s increases in interest rates this year and next year would succeed in getting inflation rates in Sweden under control. 

“We expect a steep decline in inflation which is going to return to below two percent by the end of 2023,” she said. “That depends on whether electricity prices fall after the winter, but even other prices are not going to rise as quickly.” 

After the press conference, Sweden’s finance minister, Mikael Damberg, said he broadly agreed with the prognosis. 

“I’ve said previously that we are on the way into tougher times, and that is what the institute confirms,” he told Sweden’s state broadcaster SVT. “There’s somewhat higher growth this year, at the same time as fairly high inflation which will hit many households and make it tougher to live.”

Damberg called on Sweden’s political parties to avoid making high-spending promises in the election campaign, warning that these risked driving up inflation. 

“What’s important in this situation is that we don’t get irresponsible when it comes to economic policy,” he said. “Because when parties make promises left, right and centre, it risks driving up inflation and interest rates even more, so Swedish households have an even tougher time. Right now, it’s important to prioritise.” 

 The call 

Sverige är på väg mot lågkonjunktur enligt Konjunkturinstitutets (KI) senaste prognos. Enligt finansminster Mikael Damberg (S) är det därför viktigt att Sverige sköter sin ekonomi ansvarsfullt och vågar prioritera.

– Jag tror att alla partier behöver vara lite återhållsamma och inte lova för mycket, säger han.

Mikael Damberg tycker att KI tecknar en realistisk bild av Sveriges ekonomiska verklighet.

– Jag har sagt tidigare att vi går mot tuffare tider och det är väl det som KI bekräftar. Något högre tillväxt i år men sämre tillväxtförutsättningar nästa år samt fortsatt ganska hög inflation som slår mot många hushåll och gör det tuffare att leva, säger han.

Och vad vill regeringen göra åt det?

– Det är viktigt att vi i det här läget inte är ansvarslösa i den ekonomiska politiken. För när partier lovar vitt och brett till allt riskerar vi att driva upp inflationen, öka räntan ytterligare och svenska hushåll får det svårare. Nu måste man våga prioritera.

Se intervjun med Damberg om konjunkturläget klippet ovan.

“Electricity prices are going to be twice as high as last winter,” said 

Elpriserna kommer att bli dubbelt så höga som förra vintern, säger Ylva Hedén Westerdahl, chef för Konjunkturinstitutets prognosavdelning, på en pressträff.
Den lågkonjunktur som KI ser framför sig kallar hon trots det för en mjuklandning. Den handlar främst om att människor kommer att ha mindre pengar att konsumera.

“Brist på gas i Europa gör att energipriserna ser ut att bli rekordhöga under vintern”, skriver KI, och ser att inflationen kommer att närma sig 10 procent.

Deras prognos för styrräntan är att den ligger på 2 procent vid årsslutet, vilket gör att inflationen faller tillbaka snabbt under nästa år och Riksbanken låter då räntan ligga still.

KI tillägger att de offentliga finanserna är fortsatt starka och de bedömer att det finns ett budgetutrymme på runt 120 miljarder kronor för de kommande fyra åren.

Vad gäller BNP spår KI en blygsam tillväxt på 0,5 procent nästa år – en nedskrivning från tidigare 1,2 procent.

Prognosen för arbetslösheten under 2023 är 7,8 procent, 0,3 procentenheter högre än tidigare prognos.

Fredrik Fahlman/TT
Johanna Ekström/TT

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