The European Central Bank is doing its best to stop the monetary union from going down as there is a risk of another financial crisis around the corner along with civil unrest. The ECB continues to carry all the burden of the Euro area’s economic stabilization due to its monetary policies.
ECB picking the pieces of Euro area
The fiscal policy of ECB is being used for demand management as the bank has to pick the pieces even after 11 years of global recession despite having an economic government in place for the Euro area. This economic government has been led for the last eight years by former German finance minister Wolfgang Schauble and making policies that suit his country. Germany’s way of handling the economic matters in the Euro area has been seen as one of the reasons why ECB has to pick the pieces of the region’s economy.
Germany’s mantra has reduced government spending and wrong labor reforms of increased hiring and firing which has been marketed as reforms. France is also following the same structure of austerity growth model and is facing a slowdown due to it. It also imposed a gasoline tax which created a lot of unrest in the country. That made the France government to recall the taxes and also increase public spending which it had stopped due to its austerity measures which resulted in a 10 billion euro loss and a bad negative impact on the investment and business environment in the country.
Italy is another major country in the European Union, and the EU commission differed from the fiscal package proposed its government and was forced to cut public spending and also reduced budget deficit all due to the threats of sanctions made by the EU commission. That resulted in the country reeling into a much deeper recession than it was before.
Adding to this, Germany is not allowing its budget surplus to be used and is also taking away the purchasing power of the EU trade partners by siphoning 160 billion euro leaving the ECB to do all the work. The economic policies adopted by Germany is impacting France, Spain and Italy which makes up half of EU and are unable to do much against the powerful Germans and their only hope is the monetary policies provided by ECB. But, all that could change if the new chief of ECB who is set to be elected in November takes some tough measures.