Italy's main opposition party is no less anti-German, while the governing Democratic Party is focusing on a stimulus package that Berlin does not like.
With a budget deficit slightly below 3 percent of GDP, Italy has more room than France to implement a modest fiscal easing while staying close to the euro area rules. And Rome is determined to use any policy space, and then some, to rev up a quasi-stagnant economy and to keep reducing an unemployment rate of nearly 12 percent.
Spain is a special case; its caretaker government will continue to have a virtual dispensation from the euro area budgetary compliance. At any rate, Madrid has repeatedly overshot the deficit limit of 3 percent of GDP. This year and next will be no exception, because the likely budget gap will end up in the 4.0-4.5 percent range.
What will Germany do?
Persistent rumors in the German media have it that Berlin may grudgingly concede a modest tax cut. With a budget surplus somewhere between 0.5 and 1 percent of GDP, there is plenty of room for an expansionary fiscal policy.
Apart from that, as a country running the largest trade surplus in the world ($310 billion, or more than 8 percent of GDP), and virtually no inflation, it should be stimulating its domestic demand to avoid destabilizing the monetary union with excessive trade imbalances. According to that rule of international trade adjustment, Germany should have cut taxes and stimulated domestic demand a long time ago, because its public sector accounts had been virtually balanced since 2012.
But if there is a tax cut, it will clearly look like a profoundly political gesture of vote-grabbing. The position of the governing Christian Democratic Union (CDU) is increasingly difficult in the run-up to general elections in September 2017. And more than half of the German electorate does not want the current head of government to stand for the fourth term.
In view of this, investors might wish to do what the ECB does: Pay no attention to German criticism of the euro area monetary policy. That criticism will probably be stepped up now, despite the fact that the government is getting ten-year loans at an interest rate of 0.01 percent.
And there is more to German benefits from the ECB's largesse. German budget experts estimate that the country saved 122 billion euros ($137.2 billion) on debt interest charges between 2008 and 2015 thanks to ECB's appropriately easy policies. Over that period, compliments of the ECB, Germany's net debt interest payments have halved from 2.3 percent to 1.2 percent of GDP.
No wonder that the German Green Party's deputy shouted, during last week's parliamentary debate, that the "ECB's President Mario Draghi has done more with his low interest rates for the budget balance than [German Finance Minister] Wolfgang Schäuble."
When will Germans stop suing and vilifying Dr. Draghi for these good and loyal services?
