Germany should reform now, because good times may not last: ECB's Praet
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European Central Bank executive board member Peter Praet attends the 2016 Institute of International Finance (IIF) Spring Membership meeting in Madrid, Spain, May 25, 2016. REUTERS/Susana Vera
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FRANKFURT (Reuters) - Germany relies too much on export demand and should reform now because the good times may not last, European Central Bank Executive Board Member Peter Praet told a French newspaper on Tuesday.
Germany is running a trade surplus that is an anomaly and should build up an internal market, possibly through higher wages, more investment or lower taxes, Praet, the ECB's chief economist, told L'Opinion in an interview.
It also is running a budget surplus, but Germany has rejected repeated calls for more spending, arguing that other euro zone nations need to put their houses in order and not look to German spending to lift the bloc out of its economic languor.
Praet's comments come just months after a public row between the ECB and Germany, in which Finance Minister Wolfgang Schaeuble accused the bank of creating extraordinary problems with ultra-low interest rates, contributing to the rise of the right-wing anti-immigration AfD party.
Although tensions have appeared to subside, the sides still scuffle over policy issues, as Germany opposes much of the ECB's extraordinary stimulus measures.
"The country's enormous current account surplus is an anomaly at almost 9 percent of GDP," Praet told the newspaper. "Growth is too driven by external demand. Germany has the fiscal space to develop internal demand.
"The very good environment provides a unique opportunity that won't necessarily last, as Germany is facing substantial industrial challenges in the years to come, for example in the car industry," Praet said.
Schaeuble earlier said that ECB policy was to blame for Germany's trade surplus, because sub-zero rates were keeping the euro weak, so there would be no change unless the ECB itself changed policy.
(Reporting by Balazs Koranyi; Editing by Larry King)
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