Thursday

1st Oct 2020

Sarkozy wants new role for euro bank

  • Sarkozy is trailing Hollande in polls (Photo: elysee.fr)

With just a week to go until the presidential elections, French incumbent Nicolas Sarkozy on Sunday (15 April) said the European Central Bank should get a new mandate on reviving economic growth - a no-go area for Germany.

“On the question of the ECB’s role in boosting growth, we French are going to open the debate,” Sarkozy told supporters in central Paris during the biggest rally of his re-election campaign to date.

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He said that there must be "no taboos" in discussing the rules of the eurozone, including a more growth-oriented role for the ECB: "We cannot have taboo subjects. We cannot have banned debates.”

The Frankfurt-based ECB was a political target for Sarkozy five years ago during the 2007 presidential election campaign. Since then he has regularly spoken out in favour of a more active role by the bank in saving ailing governments in the eurozone.

This put him on collision course with German Chancellor Angela Merkel for whom the independence of the bank is sacred.

In November last year as Italy and Spain's borrowing costs rose to bail-out territory, Sarkozy and Merkel, as well as Italy's Mario Monti, agreed not to publicly discuss the ECB's role to avoid the impression that the bank is subject to political influence.

The bank soon rolled out the first half of a €1 trillion worth of cheap loans to banks, which in turn bought up Spanish and Italian bonds and drove the costs down.

But Spain's borrowing costs have started to rise again in recent weeks, despite the second half of cheap loans injected in the banking system.

Sarkozy has other concerns however. He is trailing behind Socialist challenger Francois Hollande, who is advocating pro-growth policies and wants to adjust a Germany-driven fiscal discipline treaty.

According to a TNS Sofres survey published on 13 April, Hollande would win 56 percent of the vote in the run-off scheduled for 6 May.

"Europe must cut its debts, it has no choice," Sarkozy said in Paris on Sunday. "But between deflation and growth, it has no choice either. If it chooses deflation, it will disappear."

He also hinted at some adjustments to the eurozone debt and deficit rules, as the crisis has "shown the limits" of these rules - similar territory to the Hollande camp.

Meanwhile, the Socialists contender urged supporters at a rival event to "resist euphoria" and "get out and vote."

ECB staff worried about inflation

With inflation expected to stay above two percent this year, the ECB's own staff is now reportedly worried about having no protection against a slide in the value of the euro, partly caused by the institution they are working for.

"Unfortunately the pensions of ECB staff are not protected against inflation," Carlos Bowles, a spokesman for the ECB staff told Frankfurter Allgemeine Sonntagszeitung. He added that there is a legal case at the European Court of Justice against the ECB on the matter.

But if it were to agree to an inflation-linked adjustment to pensions, the ECB would be admitting it that it could fail in its core task: protecting the eurozone against inflation.

Germany defends ECB from Sarkozy proposal

Merkel has rejected Sarkozy's idea of changing the euro bank's mandate if he gets re-elected. Denmark has also urged leaders to "stop talking" about the ECB.

EU countries stuck on rule of law-budget link

Divisions among EU governments remain between those who want to suspend EU funds if rule of law is not respected, and those who want to narrow down conditionality.

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