ECB chief economist hits out at Trump’s ‘worrisome’ rhetoric
Globalisation backlash derails investment, says Praet as he prepares to leave office
The European Central Bank’s outgoing chief economist, who played a key role in the institution’s response to the eurozone crisis, has hit out at the ‘America First’ rhetoric of US president Donald Trump.
The backlash against globalisation is derailing investment across the world, Peter Praet told the Financial Times, arguing that clarity on trade rules was “absolutely essential”.
While the global trade war has so far centred on Beijing and Washington, Mr Trump has threatened to impose tariffs on $11bn-worth of European products and ratchet up barriers on European motor manufacturers.
The ECB views geopolitical risk as the main threat to the eurozone’s economy. The uncertain global environment also explains why the export- dependent region’s growth has slowed since the second half of 2018.
“Industrial organisation is very complex and a few frictions, even something relatively simple like tariff restrictions or delays, can
have big consequences in an era of just-in-time delivery systems,” Mr Praet said. “Stalling on investments, stalling on reorganising your firm, this waiting mode that companies are in can be very damaging, especially for manufacturers.”
Mr Praet will depart from the ECB at the end of May after an eventful eight-year term on its executive board, serving for most of that time as the central bank’s chief economist. He worked closely with its president Mario Draghi on the policies that are widely credited with cushioning the eurozone from crisis.
“While president Draghi rightly gets credit for steering the eurozone through a very difficult period, Peter Praet and his team have been instrumental in finding innovative ways for the ECB to deliver on its mandate,” said Mahmood Pradhan, the IMF’S euro area mission chief.
Those innovations included auctions of cheap central bank cash, negative interest rates and a €2.6tn stimulus programme that began in March 2015 and only stopped expanding at the end of last year.