The influential Brussels think tank Bruegel calls on the new ECB president for radical measures. Should the economic situation require, Christine Lagarde must also consider the possibility of so-called helicopter money, the independent think tank recommends in a report that is available to the SPIEGEL. It will be presented next week in Brussels.
This would mean that the central bank provides citizens and businesses directly with fresh money, bypassing the banks. This is to ensure that the additional purchasing power arrives directly at the customer.
Normally, the ECB tends to indirectly boost purchasing power by boosting bank lending. But the credit industry is often reliable in times of crisis. Despite favorable interest rates, many institutions are not extending their lending.
In the event that the ECB resumes its government bond purchase program, it should also abandon its self-imposed restriction to buy only 33 percent of a country's sovereign paper, the experts write. At least for countries with a triple A rating, the limit could be increased. At present, Germany, the Netherlands and Luxembourg meet this requirement in the euro area.
ECB should also buy bank bonds or shares if necessary
So far, the ECB fears that it will become the largest creditor of a country if the 33-percent limit is exceeded. If, in the case of a state bankruptcy, it would then oppose a haircut and could not take it because of its majority position, it would be suspected of improper public financing.
Bruegel Director Guntram Wolff sees things differently. "There's nothing wrong with the ECB raising its bond purchases on triple-A rated countries above its current limit," he says. Because these countries have the highest credit standing, their solvency is very unlikely.
The purchases are justified, says Wolff. "After all, the bank still misses its inflation target." The ECB is trying to keep inflation at just under two percent.
If all these measures are not enough, the ECB must also be ready to buy other forms of investment, such as bank bonds or company shares, the Brussels scientists suggest. New considerations on how the ECB can flood the markets with money are necessary because the central bank can barely lower interest rates further.
Tips for von der Leyen
In addition to recommendations for the ECB, the report also contains recommendations for action to the new EU Commission under Ursula von der Leyen, which is due to start work from November. Central to the reflection is how to strengthen the external role of the EU.
The authors strive for the EU's "economic sovereignty". "The EU should use the EU budget more than today to support digital hardware and software systems, including artificial intelligence," the researchers write. Ultimately, this was also "decisive" for the security of the EU.
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In addition, a panel of experts will examine large-scale investments from abroad in the future and determine whether security-related aspects are against it. Finally, the role of the euro as a global currency must be strengthened. Most recently, the debate on US sanctions threats against European companies doing business with Iran showed how addictive Europeans are to the dollar.
Overall, the EU must be more robust against economic pressure, such as sanctions threats from the United States, Bruegel CEO Wolff demands. The model is trade policy, where the Member States have delegated powers to the EU and where the Union is at par with the US.
The Bruegel scientists are also making concrete proposals on the subject of "Better Regulation", ie the question of how EU laws can be made more meaningful and effective. Here, the costs and risks of new legislative proposals should be better estimated and, in the future, evaluated more frequently in retrospect.