LONDON — Germany’s outgoing Finance Minister Wolfgang Schaeuble
warned that spiralling levels of debt, as well as the growth of
liquidity across the world, risk creating a new financial crisis.
Speaking to the Financial Times as he leaves his long-held post
at Germany’s finance ministry and becomes
the Speaker of the Bundestag, Schaeuble said that his
view is shared by economists around the world.
“Economists all over the world are concerned about the increased
risks arising from the accumulation of more and more liquidity
and the growth of public and private debt. I myself am concerned
about this, too,” Schaeuble said.
Schaeuble — who is renowned and often disliked across Europe for
being hugely critical of the European Central Bank’s hyper loose
monetary policy since the financial crisis — also said that the
financial world is in danger of “encouraging new bubbles to
form” thanks to the cash injections into the markets
overseen by central banks like the ECB and the Fed.
The comments echo those made by International Monetary Fund
Managing Director Christine Lagarde last week, who said that
there are “threats on the horizon” for the global economy, which
are largely associated with rising debt, despite the fact that
“we are seeing some sun break through,” when it comes to a global
economic recovery taking root.
“There are threats on the horizon: from high levels of debt
in many countries, to rapid credit expansion in China, to
excessive risk-taking in financial markets,”
Lagarde said in a speech at Harvard University.
Earlier this year, an IMF report warned that China’s huge debt
pile could be the trigger for the next financial crisis as
borrowing reaches unsustainable levels.
“International experience suggests that China’s credit growth is
on a dangerous trajectory, with increasing risks of a disruptive
adjustment or a marked growth slowdown,” the report said.
As well as opposing loose monetary policy, Schaeuble is
well-known for heavily favouring fiscally responsible policies
and defended those beliefs, saying that austerity is “strictly
speaking, an Anglo-Saxon way of describing a solid financial
policy which doesn’t necessarily see more, or higher deficits as
a good thing.”
Rising debt could trigger the next financial crisis, Germany’s finance minister warns – Business Insider