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Germany Tells the ECB It’s Time to Start Raising Interest Rates

Germany’s finance minister and the CEO of its largest private bank rounded on the European Central Bank Wednesday, urging it to stop flooding financial markets with money and return interest rates to “normal” levels.

The comments come a day before a key meeting of the ECB’s policy-making council, at which the guardians of the euro are supposed to discuss a timeline for running down their purchases of government and corporate bonds. Various reports have suggested the bank is getting cold feet about that now because the euro has risen sharply against the dollar in the last couple of months, something that could dampen the economic recovery by making exports less competitive on world markets.

“The Eurozone economy is in a good situation,” Finance Minister Wolfgang Schaeuble told a conference in Frankfurt. “We should get back to a normal monetary policy.”

Deutsche Bank chief executive John Cryan told the same conference that the ECB’s negative interest rate policy was to blame for the low profits of Europe’s banks, and was doing them severe damage in their competition with U.S. rivals. “It would help us a lot if Europe could end negative interest rates,” the newspaper Handelsblatt quoted him as saying.

Bond-buying—also known as quantitative easing—has been a key factor propping up global stock and bond markets in recent years. Germany’s government has been a huge beneficiary of that—the yields on all of its bonds with less than eight yeas to run are negative, meaning that it actually gets paid by investors for borrowing from them.

But with the Federal Reserve having stopped its purchases and raised interest rates, global markets are now depending only on the ECB and Bank of Japan for continuing support. Both of those central banks are reluctant to exit such “unconventional” policy measures while inflation is still running below target. Charles Dumas, an analyst with TS Lombard in London, said in a note Wednesday that “serious concerns could be even further off” for the ECB than they are for the Fed, whose top officials are now expressing reservations about any further interest rate hikes in the U.S. this year.