10th Apr 2020

ECB set to clash with eurozone ministers after rates increase

The European Central Bank (ECB) is heading for a collision with eurozone finance ministers, especially in Germany, after it gave its clearest signal yet that it intends to raise interest rates.

Politicians of the new German "grand coalition" government, set to be sworn in on Tuesday (22 November), reacted angrily over the weekend to a speech delivered by ECB chief Jean-Claude Trichet in Frankfurt on Friday.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Mr Trichet clearly signalled that the ECB will up its main interest rate at the bank’s next regular meeting on 1 December. He said that the bank was ready to "moderately augment the present level of ECB rates," according to press reports.

Recent oil price rises, as well as money supply data, have raised the ECB's fear for inflation, sparking calls for the bankers to increase rates for the first time in more than two years.

Since June 2003, rates have stood at 2 percent, and the expected December rise is unlikely to exceed 0.25 points, experts predict.

But the move comes as an unwelcome present to the new German government led by chancellor Angela Merkel, which sees itself faced with sluggish growth.

Ludwig Stiegler, an SPD party financial expert, said the expected rate rise would "gravely hamper" efforts to revive growth, according to the FT.

One official said the move was "not a friendly act," just days before the new government would take office.

The expected rate rise is set to spark anger not only in Berlin, but also in other European capitals which are keen on keeping borrowing costs low to boost economic growth.

According to FT Deutschland, a spokesman for Jean-Claude Juncker, the Luxembourg prime minister who heads the eurogroup, said that finance ministers will tell Mr Trichet that they find the increase problematic.

On top of this, Mr Trichet is set to be grilled over the issue by members of the European Parliament today (21 November).

The ECB's move to put up interest rates for the first time since June 2003 sharply contrasts with the strategy of the American federal reserve bank, which has gradually upped the rate from 2.25 to 3.75 percent already since June last year.

But the more healthy state of the US economy has given the American "fed" more room for manoeuvre to increase money borrowing costs than the ECB, which is under constant pressure by European politicians to keep rates low.

However, with recent figures showing that eurozone growth is slowly picking up, further ECB rate increases are on the cards for 2006, experts told the FT.

New push to kick Orban's party out of centre-right EPP

Member parties from the largest European political family have called for the expulsion of their Hungarian partner - again. This time, two prime ministers joined, but so far the heavyweights have again stayed away.

Already doubts over Belgium's new 'anti-corona government'

Belgium's King Philippe has given interim prime minister Sophie Wilmès the task of forming a government, after seven opposition parties agreed to support it. The agreement came after a political drama - and there are doubts if it will hold.


What does Erdoğan want?

By opening Turkey's border, Turkish president Recep Tayyip Erdoğan wants to push Europe into supporting him in Ankara's negotiations with Russia's Vladimir Putin for a deal on Syria's Idlib.

'Fragmented' Slovakia votes amid corruption woes

Saturday's elections in Slovakia could herald the rise of the far-right People's Party Our Slovakia, or the emergence of a populist anti-corruption candidate, in a country wracked by mistrust since the assassination two years ago of an investigative journalist.

News in Brief

  1. Migrants trapped on boat in Tripoli due to shelling
  2. EU anti-crisis budget 'could be up to €1.5 trillion'
  3. Western Balkan states appeal for EU help with masks
  4. Spain's lockdown could be extended until 10 May
  5. IMF: Pandemic crisis will be worse than great depression
  6. German economy minister expects progress on EU deal
  7. Italian PM: EU is at risk if no deal on recovery plan
  8. Belgian region to block EU Green Deal

Five new post-Brexit MEPs to watch

Five MEPs to keep an eye on from the 27 new members who are joining the European Parliament this week, following the UK's departure from the EU.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Latest News

  1. How the EU's virus-alert agency failed
  2. Flemish nationalists torpedo Belgium Green Deal pledge
  3. Eurozone agreed €500bn cushion against virus blow
  4. Why Europe must act now, and on a big scale
  5. EU court blocks Poland's bid to 'frighten' judges
  6. Coronavirus sees approval-rating soar for EU leaders
  7. EU science chief who 'quit' had been told to resign
  8. EU delays 'exit strategies' plan, as WHO urges caution

Join EUobserver

Support quality EU news

Join us