Merkel tells ECB not to raise interest rates; Schäuble vetoes Letta’s end-of-austerity, and tells Barosso to shut up

Even beyond the football, the all-German Europe is taking shape. “The European Central Bank would really have to increase the interest rates for Germany”, Frankfurter Allgemeine Zeitung quotes Angela Merkel as saying at a congress of German savings banks. She then went on to say that for other countries, the ECB would have to provide more liquidity for companies.” Our reading of the comment is that Merkel is telling the ECB that Germany is not happy with interest rate cuts, but happy with non-conventional measures. It would be interesting to see whether the ECB will duly comply with the orders from Berlin. The German economics minister subsequently had to issue a declaration that the ECB was still an independent central bank.

The article also said that Joerg Asmussen did not rule out an interest rate cut, but was playing down expectations. He said lower interest rates could work in ways not intended by the ECB, and added that they had virtually no effect in the periphery due to the broken transmission mechanisms. The article also quoted Benoit Coeure as saying that the ECB had done what it can. It was now up to all the European institutions to find ways to solve the problem.

La Stampa, meanwhile, talks about an attack by Wolfgang Schauble of Enrico Letto, the prime minister-designate. Schauble told Deutschlandfunk radio that the biggest problem in Italy was that a lack of reforms which held back the economy. It was humanly understandable to blame other for one’s own misfortune, he said. But in the eurozone everybody had to solve their own problems. And that is is what Italy needed to do as well. There was no point in asking Germany to take on more debt. Everybody had to run their government in a responsible way.

Frankfurter Allgemeine quotes Germany’s economics minister Philipp Rosler as saying that it would be absolute danger if member states departed from the course of budgetary consolidation.

In passing, Schauble also hit out at Jose Manual Barroso, saying the eurozone problems had nothing to do with strict budget rules. "Somebody should tell Barroso that."