Angela Merkel, the German Chancellor has rebuked the United States for its easy money policies, suggesting it was kicking the can down the road and setting up a greater problem later. It is high time the debate about monetary policy made it to the political arena. And Merkel, who has developed a reputation as a forthright and plain-spoken politician, never pulls her punches.
It remains to be seen whether he commentary will be addressed in the U.S. However, it should be seen as a good indication of the dichotomy between German hard money instincts and American easy money policies.
Angela Merkel, the German chancellor, turned the tables on her international critics on Wednesday by accusing the U.S. and other governments of making “cheap money” a central tool of their economic management, thus planting the seeds of a similar crisis in five years.
“Excessively cheap money in the U.S. was a driver of today’s crisis,” she told the German parliament. “I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the U.S. and elsewhere and whether we could find ourselves in five years facing the exact same crisis.”
There have been calls from outside Germany for it to beef up fiscal support, but Ms Merkel has been wary of raising public borrowing to stimulate demand, fearing that the extra income could boost Germans’ savings rate, which is already high.
The chancellor defended her government’s modest fiscal stimulus – worth €12bn over the next two years – as a “measured and proportional response?.?.?.?tailored to the situation”.
Source
Merkel criticises U.S. over crisis – Financial Times