'Such sentiments strike a chord across northern Europe, and not only with fellow euro members Austria and the Netherlands. In Switzerland, the visibly upbeat finance minister last month unveiled a 20 billion-franc ($20.4 billion) stimulus package with the preamble that, because the country had paid down debt for years, it could now afford to spend.
..
For German officials however, any sense of justification would be a long time coming. Years of striving to avoid deficits, and a constitutionally enshrined brake on debt, have earned the country a reputation as the miser of the industrialized world.
Bundesbank President Jens Weidmann, interviewed just before the crisis hit, hinted at how often he’s had to listen to criticism of Germany’s fiscal stance from counterparts, saying that “it’s a debate we have been used to hear for a while.”
..
“Countries like Germany and the Netherlands having this fiscal space now is good for all, because it provides a fiscal backup,” said Volker Wieland, a member of Germany’s Council of Economic Experts. “It keeps rates lower and helps other countries getting market access.”
However that argument progresses, there’s no question that, now a crisis has struck, German fiscal conservatives have a sense of vindication.
“Those who kept to the rules now have fiscal space,” Otmar Issing, a former ECB chief economist and Bundesbank official, told Bloomberg Television’s Guy Johnson in an interview. “Those who didn’t are now in special problems.” ''Now Germany is deploying its financial firepower to fight the coronavirus crisis, convincing the country that it was wrong to shun budget deficits for many years just got even harder.
The government of Europe’s biggest economy has long faced calls by officials from the International Monetary Fund and the European Central Bank, to the U.S. administration of Donald Trump, that it should spend and borrow more. Its finance ministers, backed by voters, insisted that balanced budgets and low debt were prudent policies storing up ammunition for a crisis.
That scenario has now materialized with the coronavirus, and Chancellor Angela Merkel is using Germany’s ample fiscal space to aid the economy and contribute to the region’s 540 billion-euro ($590 billion) rescue package. The outcome is prompting some economists to ask whether the country got it right all along with its so-called “black zero” approach, avoiding deficits for much of the past decade.
“In its fiscal approach, Germany feels absolutely vindicated,” said Holger Schmieding, chief economist at Hamburg-based Berenberg Bank. “Now we have the worst hailstorm ever in peacetime, and we have the means to go against it -- big time.”
That’s very much the message of Olaf Scholz, Germany’s Finance Minister, who is adamant that the current crisis shows the wisdom of the balanced budgets pursued by him and his predecessor, Wolfgang Schaeuble.
“When I said why it makes sense to reduce the public debt, it was always my argument: it is because there might be a crisis,” he told Bloomberg Television on March 25. “Now we have the strength, and we will use it.”
Such sentiments strike a chord across northern Europe, and not only with fellow euro members Austria and the Netherlands. In Switzerland, the visibly upbeat finance minister last month unveiled a 20 billion-franc ($20.4 billion) stimulus package with the preamble that, because the country had paid down debt for years, it could now afford to spend.
..
For German officials however, any sense of justification would be a long time coming. Years of striving to avoid deficits, and a constitutionally enshrined brake on debt, have earned the country a reputation as the miser of the industrialized world.
Bundesbank President Jens Weidmann, interviewed just before the crisis hit, hinted at how often he’s had to listen to criticism of Germany’s fiscal stance from counterparts, saying that “it’s a debate we have been used to hear for a while.”
..
“Countries like Germany and the Netherlands having this fiscal space now is good for all, because it provides a fiscal backup,” said Volker Wieland, a member of Germany’s Council of Economic Experts. “It keeps rates lower and helps other countries getting market access.”
However that argument progresses, there’s no question that, now a crisis has struck, German fiscal conservatives have a sense of vindication.
“Those who kept to the rules now have fiscal space,” Otmar Issing, a former ECB chief economist and Bundesbank official, told Bloomberg Television’s Guy Johnson in an interview. “Those who didn’t are now in special problems.” '
- Bloomberg,
Crisis Gives Germany Sense of Vindication for ‘Black Zero’ Years, April 14, 2020
Context(Banking Reform - Monetary Reform) - '..debt is our biggest security threat..'History is Clear, Central Banks Fail to Assure Economic StabilityWeimar malaise - '..Monetary policymakers are urging more extreme actions in their frantic pursuit of higher inflation. They should be careful what they wish for.''..credit policies to ease credit..' - '..1844 .. the issuance of banknotes .. They could thrive as deposit currency.''..Greece .. commitments to stronger public finances, debt repayment and reforms..' - 'Corruption..' - '..restructure..'Germany - '..achieving a federal budget with no new debts - a year ahead of schedule.'(Germany) - 'Berlin said in May it had a chance of taking on no new debt from 2015.'(Global) - '..how monetary policymakers somehow remained oblivious to the havoc they were instrumental in fomenting.'