Ifo president sinn criticizes ecb for lowering interest rates

Ifo president sinn criticizes ecb for lowering interest rates

"Draghi is abusing the euro system by giving the sudlanders cheap loans that they could not get on the capital market", sinn told the "bild" newspaper. The rescue of the crisis countries is not the task of the ECB, but of the rescue umbrella provided for this purpose.

In the meantime, five years have passed without any significant improvement in the competitiveness of the crisis countries, sinn complained. "For the euro crisis countries to save more and implement urgent reforms, they need higher interest rates commensurate with their higher competitive risk, not lower interest rates."

On thursday europe’s watchdogs had cut the prime rate from 0.5 to the historic low of 0.25 percent. ECB president draghi had justified the move by citing low inflation expectations and the sluggish economic recovery.

Low interest rates tend to make loans and investments cheaper, thus boosting the economy. However, after the ECB decision, there were numerous critical voices. The low level of interest rates is devaluing financial investments and posing major problems for life insurers, for example, in generating adequate surpluses for their customers.


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