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German criticism of ECB gets louder as politicians say savers are losing out

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A chorus of conservative German politicians have criticised the European Central Bank for its interest rate policy, which they say is hitting the retirement provisions of ordinary Germans, could lead to asset bubbles and even boost the right-wing.

[BERLIN] A chorus of conservative German politicians have criticised the European Central Bank for its interest rate policy, which they say is hitting the retirement provisions of ordinary Germans, could lead to asset bubbles and even boost the right-wing.

German finance minister Wolfgang Schaeuble partly blamed the ECB's policy for the success of the right-wing Alternative for Germany (AfD) in recent regional elections, which saw it take up to a quarter of votes in a setback to Schaeuble's conservatives, according to the Wall Street Journal.

The newspaper quoted Mr Schaeuble as saying he had told ECB President Mario Draghi: "Be very proud: You can attribute 50 per cent of the results of a party that seems to be new and successful in Germany to the design of this policy."

A finance ministry spokesman declined to confirm the comments.

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In March the ECB unveiled a large stimulus package that included cutting its deposit rate deeper into negative territory, expanding asset buys and offering free loans to the corporate sector to stimulate growth.

"The ECB is taking a very risky path," transport minister Alexander Dobrindt told German newspaper Welt am Sonntag, adding that the central bank's policy signalled to citizens that there was no point in saving or putting money by for their retirement.

"The disappearance of interest is creating a gaping hole in citizens' retirement provisions so the efforts many people are making to ensure their prosperity in old age could vanish into thin air," said Mr Dobrindt, a member of the Christian Social Union (CSU), the Bavarian sister party to Chancellor Angela Merkel's Christian Democrats (CDU).

The newspaper cited calculations by DZ Bank as showing Germans losing out on 343 billion euros (S$528 billion) in interest on their savings in current accounts, securities and insurance between 2010 and 2016. That compared with interest savings - due to cheap loans for home construction, for example - of 144 billion euros in the same period, it said.

Senior CSU member Andreas Scheuer told the newspaper the ECB's policy was an "attack on small savers" and warned that practically abolishing interest could lead to asset bubbles and excessive levels of debt.

The politicians were adding their voice to a growing group of critics in Germany. Finance policy officials from the conservative bloc have said the ECB is operating at the limit of its mandate to deliver price stability with its policy of negative interest rates.

'NOT LOUD ENOUGH'

Michael Fuchs, a senior CDU lawmaker, was quoted by magazine Der Spiegel as saying the ruling coalition of conservatives and Social Democrats needed to make clear it thought the bank's interest rate policy was "wrong", adding: "We're not loud enough yet."

The CSU's Gerda Hasselfeldt told Welt am Sonntag the ECB's latest measures looked like an "act of desperation" by a bank that was running out of options and warned if new expansionary measures kept evaporating with almost no effect, the bank would increasingly lack trust.

On Saturday Germany's finance ministry denied a report that it would consider taking legal action if the ECB resorts to "helicopter money" distributions to euro zone citizens, an extreme form of monetary easing.

Banks are also complaining about problems related to the ECB's policy. Hans-Walter Peters, head of Berenberg Bank, told Frankfurter Allgemeine Sonntagszeitung he saw "significant risks" due to the ECB's low interest rate policy which he said was punishing banks with big liquidity reserves.

"In this respect, the ECB is jeopardising the stability of the financial system," he said.

REUTERS

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