Yves Mersch, a member of the ECB’s executive board stated at an open-house event at the Bundesbank that the ECB needs perseverance with its current policy of bond buying as well as negative interest rates. He told the audience that the ECB’s negative interest-rate policy along with its €2.3tn bond-buying program had helped ‘revive the economy’ however ‘this movement is not yet self-sustained, that’s why we need to have patience with this policy’. However, Mersch believes that the ECB could change its stance before it achieves its goal of 2% inflation. He said, ‘Differently than in other countries, where they say they have to reach 2 percent, we say we need to reach a level which is compatible in the mid-term’, adding ‘We don’t necessarily have to wait for prices to reach 2 percent before adjusting monetary policy’. Germany, by far Europe’s strongest economy, believes that those countries with less fiscal stability may pressure the ECB to continue its fiscal stimulus for longer than necessary.
Whilst one of Germany’s strongest industries, car manufacturing, goes from strength to strength, it has been reported by the Society of Motor Manufacturers and Traders (SMMT) that investment in the British car industry has collapsed in the first half of 2017. According to the SMMT, investment up to the end of June this year was just GBP322m, compared to GBP1.66bn last year, which in itself was down 30% on 2015’s GBP2.5bn figure. If the same levels of investment continue until the end of 2017, it would represent just one quarter of the amount invested 2 years ago, a staggering drop by any standards, and much more aggressive than anybody thought. Just as worrying was the fact that of the GBP322m spent, approximately 75% of that was invested in just one plant. As Mike Hawes, chief executive of the SMMT said, ‘It’s very difficult to cost investment if you don’t know what your output price is going to be’ adding that after the Brexit vote the industry ‘wants a lot more certainty’.
Also certainty is the one thing a City of London delegation will look to get as it heads for Brussel this morning with what it says is a secret blueprint for a free trade deal on financial services. Although the delegation is not on official government duty, according to Whitehall sources, it does have the support of government. Leading the delegation will be Mark Hoban of the International Regulatory Strategy Group, whose blueprint is believed to be based on a ‘mutual access’ principle, allowing all the remaining members of EU and the UK to operate in each other’s markets without barriers whilst continuing to share regulatory supervision and joint dispute resolution.