July 8, 2019 / 9:49 AM / 4 months ago

ECB should mull curbing low interest period: Merkel heir apparent

BERLIN (Reuters) - The European Central Bank’s low interest rate policy is causing problems for savers and thought should be given to curbing its duration, Annegret Kramp-Karrenbauer, leader of Germany’s Christian Democrats (CDU) said in a newspaper interview.

FILE PHOTO: Annegret Kramp-Karrenbauer, chairwoman of Germany's Christian Democratic Union (CDU), delivers a speech during a festivity to celebrate the 70th anniversary of the German Institute for Economic Research (Ifo) in Munich, Germany, June 6, 2019. REUTERS/Michael Dalder/File Photo

Kramp-Karrenbauer, who succeeded Chancellor Angela Merkel as CDU leader in December, stressed in the interview with the daily Frankfurter Allgemeine Zeitung that the ECB is independent and should remain so, focused on its price stability mandate.

“At the same time, one has to look for the future at whether the low interest rate phase should not, nonetheless, be curbed a bit,” she said in the interview, published in Monday’s edition of the newspaper.

“Because the effect of these low interest rates is problematic, among other things because people with conventional savings deposits - including many in Germany - do not benefit from them,” added Kramp-Karrenbauer, Merkel’s heir apparent.

“And when yields are so low, capital flows out of Europe. That is why we must ensure we continue to have leeway in monetary policy, but at the same time make monetary policy sustainable and very sensible. That is now a task for Christine Lagarde.”

Lagarde, former French finance minister and IMF director since 2011, was tapped by European leaders last week to replace Mario Draghi as ECB president.

Kramp-Karrenbauer’s comments reflect frustration in Germany with the ECB’s record low interest rates, which many believe are deployed to support weaker southern European economies and leave German savers with poor returns for their financial prudence.

Her comments are nonetheless a rare, if veiled, criticism of the ECB’s policy stance from a senior German politician.

Since taking over as CDU leader last December, Kramp-Karrenbauer has made a series of gaffes that have raised questions about her suitability to become chancellor once Merkel relinquishes the post, which she plans to hold onto until 2021.

In March, Kramp-Karrenbauer drew sharp criticism from her Social Democrat coalition partners for poking fun at trans-gender people in a light-hearted carnival speech.

In February, she was ridiculed for addressing a high-profile meeting of her conservative CDU party by calling them Social Democrats.

Writing by Paul Carrel; Editing by Toby Chopra

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