The European Central Bank’s loose monetary policy risks destroying the European project, Deutsche Bank has warned.
In a blistering attack, Deutsche suggested the ECB had “los[t] the plot” and that its “desperate” actions raised the risk of a potentially “catastrophic” mistake by the central bank.
David Folkerts-Landau, Deutsche’s chief economist, said negative interest rates and quantitative easing had hurt savers and allowed politicians to delay badly-needed structural reforms.
“ECB policy is threatening the European project as a whole for the sake of short-term financial stability,” he said in a note titled “The ECB must change course”.
It said: “The longer policy prevents the necessary catharsis, the more it contributes to the growth of populist or extremist politics.
“The benefits from ever-looser policy are diminishing while the litany of distortions, perversions and disincentives grows by the day. Savers are punished and speculators rewarded. Bad companies survive while good companies are too scared to invest.”