While Marcel Fratzscher considers the high inflation rates to be a temporary phenomenon in the discussion, Wieland points to an increase in the overall price level. It is more than a short-term blip, he said, so the central bank must react. The ECB should present an exit plan from its low interest rate policy.
Fiscal dominance, the fear that monetary policy will ultimately be determined by fiscal policy, is a serious risk, according to Wieland. "Central bankers must counter this," he urged. It will not be easy to disentangle monetary and fiscal policy again, he added. According to Wieland, however, this is feasible: "Even in the case of highly indebted countries, interest expenditure is now so low that a normalization of monetary policy is bearable."
Wieland sees the current discussion about EU debt limits as a danger in this regard. "Politicians must commit to stable public finances," he warns. The rules are flexible enough and rather too flexible, he says. According to Wieland, debt limits should not be tampered with. "I think proposals to simply raise the debt limits for highly indebted countries are wrong. By doing so, we are setting in motion a wrong dynamic that will also further increase inflationary pressure."
Handelsblatt: "Wieland fordert geldpolitische Wende der EZB" (€)