German Chancellor attacks quantitative easing

by Gill Montia

Story link: German Chancellor attacks quantitative easing

German Chancellor, Angela Merkel, has publicly criticised the Government’s quantitative easing policy, warning that flooding the UK economy with new money could worsen the economic crisis.

The programme actually involves the Treasury stretching its balance sheet to buy up assets, such as government bonds, rather than the printing of new notes.

In the short-term it provides banks with lending capacity but ultimately could lead to soaring inflation.

Ms Merkel extended her comments to the Federal Reserve and European Central Bank, both of which have used quantitative easing to combat the global recession.

Her comments came as new figures from the Bank of England show that lending to UK businesses and individuals fell during April, despite the quantitative easing strategy.

According to a report in The Times, lending to UK business other than banks and other financial institutions fell by £4.7 billion in April, representing the biggest monthly decrease since records began over ten years ago.