Danish minister slams ECB’s stimulus policy

Bloomberg

Denmark’s government is wondering how much longer the economy will be exposed to the distortions wrought by negative interest rates, and is urging European Union leaders to enter a debate on the appropriateness of the current monetary policy environment.
The country, which has lived with negative rates longer than any other, has been forced to keep its main monetary policy instrument below zero for half a decade to protect the krone’s peg to the euro. Danish rates first went negative in mid-2012, and most economists expect the policy to persist until 2020.
The obvious risk is “price pressure that can lead to bubbles,” Danish Finance Minister Kristian Jensen said in an interview in Copenhagen. “We’re in a situation where our economic upswing has been under way for a while longer than in many other EU countries.” “We would definitely be positive if the ECB would ease up on the very aggressive monetary policy it has right now,” Jensen said. “The buying of bonds is very aggressive in my view, especially looking at the condition of the European economy.”
“Right now, I don’t think the low rates are the right medicine for a long-term positive development,” Jensen said. For Denmark, the
monetary climate has pushed the economy to the limits of its capacity utilisation. “We’re now facing a
labor shortage, with more firms ready to hire than there are peo-
ple willing to work,” he said.
“That means we need a situation in which there’s less heat coming from monetary stimulus.”
Jensen says Denmark is now taking the opportunities available to it to raise these concerns with EU leaders. “There’s a growing number of EU countries that have emerged from the crisis, so these very low rates aren’t needed any more, the upswing is stable,” Jensen said.
“France is making sweeping reforms now, and Spain’s elevated itself markedly since last year. There’s a lot of countries doing a lot better and therefore we ought to see a normalization of monetary policy,” he said.
Denmark can’t exit its extreme monetary policy alone, because of the euro peg. Its main deposit rate is minus 0.65 percent, compared with the ECB’s deposit rate of minus 0.4 percent. The distortions coming from extreme negative rates include an overheated property market, with the government
recently taking measures to prev-ent Denmark’s most indebted households from borrowing more.