Eurozone: Varoufakis discusses the 'greatest beneficiary' in 2018
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After an 18-month review the body boosted the target to two percent, from “below but close to two percent”. Inflation has surged to 2.3 percent in Germany, fuelled by a reduction in coronavirus restrictions.
However as a eurozone member Germany is unable to tackle this by increasing interest rates.
Only the ECB, which manages the eurozone economy, could do this and it would risk torpedoing the economies of high-debt members.
Florian Weber, from the nationalist Bavarian Party, was scathing about the ECB’s management.
Speaking to German news site Presse Portal he said: “The whole thing is a farce.
“The ECB just pretends to be the master of the procedure.
“Even though it has manoeuvred itself into a dead end with its zero and negative interest rate policy, the pockets of the ECB are empty.
“Now the year-long ‘close your eyes and hope for the best’ course, with which, by the way, the ECB has always exceeded its mandate, which is designed exclusively for price stability, is taking revenge.”
Mr Weber argued eurozone leaders risk undermining trust in their currency.
He commented: “I do not know whether the ladies and gentlemen in Frankfurt [where the ECB is based] realise that the stability of a currency is primarily based on trust.
“And that they are just about to gamble away the last little bit of trust and credibility.”
The Bavarian Party wants Bavaria, Germany’s largest state, to become an independent country.
They secured 1.7 percent of the vote at the 2017 Bavarian parliament elections.
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There are fears inflation across the Eurozone will rise further due to the ECB’s policy of quantitative easing.
In June Jens Weidmann, who heads the German central bank, warned: “Inflation is not dead.”
Inflation, which measures how prices are rising, has a huge impact on a country’s economy.
High inflation devalues a currency, making it more expensive to buy goods from abroad.
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The ECB governing council issued a statement justifying its decision to raise its interest rate target.
It said: “When the economy is operating close to [zero] interest rates, it requires especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched.
“This may also imply a transitory period in which inflation is moderately above target.”
Many Eurozone economies are struggling with high government debt, made worse by the coronavirus pandemic.
During the 2009-12 Eurozone crisis a number of EU states had to be bailed out to prevent bankruptcy.
In response they were required to sharply cut government spending, causing a spike in unemployment.
Additional reporting by Monika Pallenberg.
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