Germany a hawk? 'The camps are going to shift'

In July 2022, the European Central Bank (ECB) launched the Transmission Protection Mechanism (TPI); a means of narrowing rising interest rate spreads within the Eurozone. An apparently poor choice, according to De Vries. He argues that it is very unclear when a monetary policy will be reflected in the actual market interest rate. Moreover, De Vries argues that the TPI is used too frequently and in an uncontrolled manner.

According to the emeritus professor, it would be better to allow the European emergency fund for countries in trouble, the ESM, to play a greater role. This mechanism makes money available to countries with excessive government debt. As a result, a country then has a debt with the ESM, similar to a debt that a company may have with a bank. Yet there is also a danger behind this: the mechanism largely resembles monetary financing, the financing of government deficits by the ECB, which is prohibited in the eurozone. 

Finally, De Vries expresses his concerns about the future situation of neighboring Germany. Since working people in Germany pay for the pensions of the elderly, and since ageing is an emerging problem, he expects that Germany will also have to borrow heavily in the next 20 years.