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Germany's Finance Minister: No Rescue from Eurozone Deflation by the European Central Bank

Prominent political leaders from the eurozone's two largest economies have recently expressed a lack of confidence in the European Central Bank's ability to rescue the eurozone from deflation.

On Aug. 1, French Prime Minister Manuel Valls told a seminar at the Elysee presidential palace that the ECB is "powerless" to stop eurozone deflation.

Now, Germany's finance minister expresses a similar view.

This excerpt from an Aug. 29 Bloomberg article explains:

German Finance Minister Wolfgang Schaeuble has bad news for anyone hoping the European Central Bank will ride to the rescue of the ailing euro region:

"Monetary policy has come to the end of its instruments. I don't think ECB monetary policy has the instruments to fight deflation, to be quite frank. What we urgently need is investments, regaining confidence by investors, by markets, by consumers."

His comments, in an interview with Bloomberg Television today, coincide with figures showing annual inflation slowed to 0.3 percent in the euro zone this month. That was the weakest rate of growth since October 2009 and marks 11 consecutive months of prices growing by less than 1 percent. The deflationary danger policy makers have been denying for months may be upon them.

This adds to the gloomy outlook in Europe. One-, two- and three-year yields are negative in Germany, meaning investors are paying for the privilege of the perceived safety of German debt. A critical money-market rate, the Effective Overnight Index Average -- Eonia for short -- dropped below zero for the first time yesterday, reaching -0.004 percent.

The article also describes the start of another ECB program that the central bank hopes will stimulate the Continent's economy.

You can read about it by clicking on this link:

http://www.bloombergview.com/articles/2014-08-29/germany-to-europe-help-isn-t-on-the-way