Struggling economies within Europe, such as Spain, Italy and Greece have been hoping for a rise in interest rates from the European Central Bank (ECB) as it would increase investment and help the shoots of recovery that are springing up but also help stave off any economy from over-heating and stifle inflationary pressures.
Although at the early stages of recovery, the struggling economies are now showing signs of optimism after a long period of low growth and virtually zero interest rates across the board.
Holiday destinations such as Spain, Italy and Greece have been reporting summer bookings are currently booming with holidaymakers spending their cash, helping to provide jobs and much needed revenue as well as boosting the tax intake.
Germany could scupper interest rate rises in Europe
However, with that increased investment there is a danger though that any rising prosperity could trigger inflationary pressures.
A rise in interest rates in the near future would help curtail any excess and encourage people to save.
While such a measure from the ECB would help those economies an eminent business expert has warned that German self interest in protect its own industries could scupper any hopes of an interest rate rise.
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Dr Werner-Josef Gartner, Professor Emeritus of Strategic Management and a director of the Global Research Institute-Gartner, has warned that Germany could quash any plans for interest rises to protect its car manufacturing and engineering industries.
Dr Gartner wrote in Welt: “Germany could thwart the plans to raise interest rates. The reason for this is the restrain of foreign customers of German cars.
“So far the strong sales markets, such as the USA, the UK and China, are more reserved with their orders.
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Holidaymakers this summer visiting countries like Spain and Greece could give a much needed boost
Germany could thwart the plans to raise interest rates. The reason for this is the restrain of foreign customers of German cars
Dr Werner-Josef Gartner
“The mechanical engineering industry is also worried, as domestic demand is also currently at a low level.
“Only replacement procurement was being carried out. Exports are also not very prosperous.
“The US, an important market for mechanical engineering, is still lagging behind with their orders – but in the second half of the year they could pick up again. The hope is that the US government will be offering tax relief.”
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The professor, however, argues the ECB could “raise key interest rates by 20 base points by the end of the year" giving what he describes as a “small Christmas present for the savers” who have gained hardly anything on their savings in the past few years.
Mr Trump was reported to have said: "The Germans are bad, really bad. Look at the millions of cars they sell in the US. It’s terrible. We’ll put a stop to that.”
Holidaymakers to Spain this summer will provide much-needed revenue to the country
In the past Mr Trump has also lashed out German economic self-interest, accusing Mrs Merkel’s government of deliberately running a trade surplus, and threatened to impose punitive tariffs on German imports to the US.
Any imminent rise in interest rates from the ECB could be unlikely though as the International Monetary Fund (IMF) has also warned against any early rise in base rates.
IMF Financial Market chief Tobias Adrian said: “We are still a little bit away from a sustainable turnaround in the inflation trend.”
The IMF expects the inflation rate in the euro area to weaken again from May and to remain "well below the target value of the ECB, but close to two per cent”.
In addition, the core inflation rate is still "very low" at around 1.2 per cent, so according to the IMF, there is no need to increase rates.