The ZEW’s caustic view is broadly shared by the German Council of Economic Experts (Five Wise Men) and most of the Ordoliberal establishment. Former Bundesbank chief Axel Weber said at a recent forum in Frankfurt that the ECB had lost the plot on inflation and would soon be forced to take “active measures” to contain the fall-out, including rate rises. That would hit complacent markets like a thunderbolt.
It is above all the view of Friedrich Merz, the designated “finance superminster” of the next government if the Christian Democrats keep power in this month’s election.
Mr Merz said the ECB had reached “the limits of its mandate” and was playing down evidence of surging prices in everything from the daily shopping basket, to rent, home prices, and filling up the petrol tank.
Inflation is particularly corrosive in Germany, not because of Weimar mythology but because just half the population owns property or equities. The other half rents for life and mostly keeps savings in bank deposit accounts. This half is being pauperised. Furthermore, negative rates are destroying the business model of the small cooperative and savings banks that provide 90pc of credit for the Mittelstand family firms, the backbone of the German socio-economic system.
Grumbling in Germany has long been a fixture of the eurozone. Nothing much ever happens. There was barely a hiccup after the German constitutional court ruled last year that the ECB was acting ultra vires and subverting the fiscal sovereignty of national parliaments.
Nor did anything happen when a group of elder statesmen warned that uncontrolled debasement is destroying the foundations of the German social market economy, and risks setting off a “social explosion”.
What is different this time is that inflation can be felt everywhere – gefühlte Inflation – and parts of the German economy are patently overheating. One can argue that the picture is more akin to stagflation as rising prices collide with slowing growth (due to supply bottlenecks) but this merely takes us back to the conflicts of the 1970s: Club Med central banks let stagflation run; the Bundesbank fought it.