US Federal Reserve's $600bn stimulus doomed to failure, says German minister
THE US Federal Reserve’s $600 billion injection is “dismal”, “clueless” and doomed to failure, according to German finance minister Wolfgang Schäuble.
In unusually sharp language, Mr Schäuble said Washington was mistaken to pump further billions into the US economy in the hope that it would encourage growth.
“With all due respect, my impression is that the US is at a loss as to what to do,” said Mr Schäuble.
“This isn’t about a liquidity shortage, so to say ‘we’ll throw $600 billion at it’, won’t solve the problem.” He found sharp words, too, over the ongoing currency unrest between the US and China.
Washington has accused Beijing of keeping the value of its yuan artificially low to help exports, but Mr Schäuble accused Washington of “pursuing the same goal with different instruments”.
The minister’s words contained an element of political payback for similar tough talking from Washington before May’s Greek bailout. Then, president Obama and treasury secretary Timothy Geithner made public and private interventions with Mr Schäuble and chancellor Angela Merkel. Mr Geithner in particular criticised Berlin for not spending more on fiscal stimulus programmes. With the US economy flatlining, Germany is heading for 3 per cent growth in 2010.
That has prompted a feeling of schadenfreude in some Berlin circles, though not with Mr Schäuble.
“We don’t have the least reason for schadenfreude, rather we only have reason to be worried,” he said.
“It’s our problem too if the US is no longer certain that the old recipes don’t work anymore,” he said. “Instead we only have reason to be worried.”
As well as not solving their own problems, the German finance minister predicted that “they will create further problems for the world”. “They’ve already pumped endless amounts of money into the economy,” he said. “The results are dismal.”
Mr Schäuble dismissed concerns of ECB president Jean-Claude Trichet about EU plans to ask investors help pay for future financial crises.
“I don’t share (his) argument that the markets will be unsettled,” he said.