Bielmeiers Blog

DZ BANK

Stefan Bielmeier, DZ BANK’s Chief Economist and Head of Research, comments on economic developments in Europe, the USA and the Emerging Markets, assesses international financial market trends and gives his opinion on politics and economic policy – concisely, succinctly and to the point. The economics and financial market experts of DZ BANK’s Research division support Stefan Bielmeier in his blog. Find out more in Bielmeier‘s Blog about DZ BANK Research’s current topics, the experts’ focal areas, and their general viewpoints on the latest developments.
Central banks – when the exception becomes the monetary policy rule

Almost a decade after the start of the financial market crisis, the big industrialised nations still find themselves in an exceptional situation when it comes to monetary policy. In view of weak economic growth, ongoing disinflation and shocks exogenous to the market, such as the Brexit vote, three of the four major central banks are relying on “extraordinary” monetary policy measures – the ECB, BoJ and BoE. Criticism has been voiced that the central banks’ decision to take extremely expansionary measures is not purely the result of external circumstances. The central banks’ asymmetrical response functions (to economic cycles) are also said to have favoured these developments. The duration and scope of QE measures mean that they hardly deserve the attribute of “extraordinary” any longer. Instead, it looks like they might become the new monetary policy rule. The US central bank already stopped taking unconventional measures two years ago. Nonetheless, the…

The ECB’s monetary policy undermines reform incentives in the periphery

Euro area governments and the ECB are not pulling together. On the basis of its mandate and according to its own official statements the European Central Bank’s policy is aimed at guaranteeing monetary stability. In order to ward off the danger of deflation in the Euro area, the ECB is pursuing a highly accommodative policy, but this is enjoying ever less support from the national governments in the form of the implementation of structural reforms. Especially the periphery states are facing growing internal political resistance, which is clearly eroding their readiness to implement reforms and impose austerity measures. At the same time, the former crisis states are benefiting from the fact that the risk premiums on EMU government bonds are distorted to the downside because of the ECB’s policy and the incentive for commercial banks to hold government bonds. Given their high levels of debt these countries have an interest…

Australia is going through a structural transformation – away from raw materials exports

Australia is going through a process of economic diversification. The country is an important global supplier not only of iron ore, coal, bauxite and various precious metals, but also of liquid gas. As such it is feeling the pinch of the end of the super cycle and the steep fall in prices in these markets. It also needs to change the focus of its production structure in order to put an end to its dependency on raw materials exports and to be able to maintain high economic growth in the future. Since 2013 investment and employment in Australia’s raw materials sector have been declining. The conservative Prime Minister, Malcolm Turnbull, aims to accelerate the restructuring process by political means. As regards corporate restructuring, Turnbull is focusing especially on smaller companies. Worthy of note here are his plans to promote tourism and tourism-related services as revenues from tourists from China and…

Italy: Assessing the effects of the labour market reform “Jobs Act” – what has been achieved so far

Italy’s lengthy economic crisis has caused unemployment to rise noticeably in past years. Rigid labour market regulation has additionally decelerated the development of employment. Both factors prompted the Italian government to act and overhaul the labour market. Due to the rigid regulation of the Italian labour market, employees had become divided into two groups – those with permanent jobs that were virtually impossible to terminate and those with limited working contracts. The reform was adopted at the end of 2014 and implemented in stages in the first half of 2015. Essentially the labour market reform, dubbed the “Jobs Act”, focused on loosening up the previously very strong protection against dismissal rules. A new working contract model was created that was intended to act as a bridge between temporary and permanent employment. In addition to creating more flexibility, the workforce was also to be offered greater social security. The reform has…

Spain: Reform policies pay off – they must only be continued

After eight months and two rounds of general elections, Spain’s parliamentarians have still not succeeded in establishing a new government. Rajoy, the prime minister to date, is therefore only a caretaker prime minister. What is problematic is that the cabinet is not permitted to submit new bills to parliament and therefore simply administers the status quo. Despite the economic successes, the popularity of Rajoy and his conservative party has fallen. Corruption scandals have weakened confidence in the established parties and courageous structural reforms have led to painful cuts for the population. The reforms to date no doubt played a key role in Spain managing to come out of recession and now being in a strong economic upturn. Core elements of the economic reform programme were reforms to labour law to enable greater flexibility. Protection against termination was eased and collective bargaining agreements made more flexible. There have also been extensive…

Interview on Bloomberg 08.09.2016 – “Why ECB Monetary Policy ‘Over Action’ Is Not Working”

⇒  Why ECB Monetary Policy ‘Over Action’ Is Not Working Stefan Bielmeier, chief economist at DZ Bank, discusses challenges facing the European Central Bank, what he calls monetary policy “over action” and the need for fiscal policy stimulus. He speaks with Caroline Hyde on Bloomberg Television’s “On The Move.” (Source: Bloomberg)