"No Need Right Now": Bundesbank Pours Cold Water On German Fiscal Stimulus Hopes

One of the pillars of support that has helped propel European stocks higher in recent days was violently yanked this morning, when Bloomberg reported that Germany’s Bundesbank refuted repeated trial balloons by Spiegel, saying it doesn’t see a need for fiscal stimulus at this time, even though it expects the economy to shrink again this quarter.

While Germany’s Finance Minister Olaf Scholz said it would be prudent to prepare measures that could be implemented if the outlook worsens, the economy currently doesn’t require additional support, the Bloomberg sources said, asking not to be identified revealing internal deliberations.

As Bloomberg adds, Bundesbank economists predicted that German output could fall 0.1% in the third quarter, the same contractionary pace as in the previous quarter, which would result in a technical recession.

As noted earlier, Germany’s economic contraction, highlighted earlier on Thursday by a continued slump in the country’s manufacturing PMI, has prompted a wave of calls for the government to provide a fiscal boost.

Yet even with long-term borrowing costs below zero, the government – bizarrely reluctant to issue new debt “just because it can” and shocking economic “experts” around the world – has been reluctant to abandon its balanced-budget policy and jump into action. However, in a first sign that even Berling may be about to crack, Bloomberg reported earlier this week that it’s is preparing measures that could be triggered by a deep recession.

However, just like Trump, the German central bank refuses to accept the true extend of the economic slowdown, and instead experts there describe the state of the economy as one of protracted stagnation, with the performance over the past year skewed by a range of temporary factors. Mild winter weather, for example, bolstered output in the first quarter, with payback in the spring.

Still, unlike Trump, the Bundesbank admitted that its complacent assessment could be wrong, and in its monthly report published Monday, the central bank highlighted the difficulty predicting the current course of the economy, with manufacturing in a deep downturn and private consumption still solid.

“As things currently stand, it is unclear whether exports and, by extension, industry will regain their footing before the domestic economy becomes more severely affected,” the Bundesbank wrote according to Bloomberg.

Source Article from http://feedproxy.google.com/~r/zerohedge/feed/~3/eygn8sLiSgw/no-need-right-now-bundesbank-pours-cold-water-german-fiscal-stimulus-hopes

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