• Friday, March 29, 2024
businessday logo

BusinessDay

German problem’ at ECB exposed by Lautenschläger departure

German problem’ at ECB exposed by Lautenschläger departure

Tensions between the European Central Bank and Germany have again exploded into public view after the resignation of Sabine Lautenschläger, who represented the eurozone’s biggest economy on the central bank’s executive board.

Ms Lautenschläger — who is leaving weeks after publicly opposing further easing of superloose monetary policy by the ECB — is the latest of a string of German representatives to quit the central bank after failing to stop the flow of cheap money.

Eight years ago, ECB chief economist Jürgen Stark departed in protest over its purchases of government bonds in response to the eurozone debt crisis. Earlier that year, Axel Weber resigned as head of Germany’s Bundesbank, and therefore as a member of the ECB’S governing council, after fiercely opposing the ECB’S strategy.

Read also; Deutsche chief Christian Sewing warns ‘sky has darkened’ for Europe

Underlying these departures is deep-rooted opposition to the ECB’S policies among the German public and media, even if its strategy is broadly supported by the government in Berlin. Germany’s top-selling newspaper this month portrayed ECB president Mario Draghi as a vampire sucking money out of savers’ accounts.

“Does the ECB have a German problem, or does Germany have a problem with the ECB?” asked Katharina Utermöhl, senior economist at German insurer Allianz. “It is fair to assume that Sabine Lautenschläger fits into a trend that includes Jürgen Stark and Axel Weber all leaving because of differences over monetary policy.”

German representatives at the ECB are often uncomfortable at having to defend the extraordinary easing policies used since the 2008 financial crisis to a domestic audience angered at the erosion of their savings and suspicious about monetary policy being used to others’ benefit.

“Many people in Germany believe that the ECB doesn’t make monetary policy for the eurozone as a whole but has made decisions that favour southern European countries in particular and produce a redistribution of wealth,” said Jörg Krämer, chief economist at German lender Commerzbank. “They realise it is not in their interests.”

The ECB did not say why Ms Lautenschläger had quit and she could not be reached for comment. But people briefed on the matter said she felt it was the right time to leave, citing a mix of her opposition to recent monetary policy, the ending of her extra role in banking supervision and the impending succession at the top of the ECB, with Mr Draghi set to hand over as president to Christine Lagarde on November 1.

Ms Lautenschläger joined the ECB’S executive board in 2014 and had been due to stay until 2022. She was replaced this year as vicechair of the supervisory board of the ECB’S Single Supervisory Mechanism, having completed a five-year term and helped to establish the body that oversees the eurozone’s biggest banks.

Her departure removes the only female member of the ECB’S 25-person governing council.