ECB’s Nowotny Says 74 Years of Peace Have Unbalanced the Economy

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European Central Bank policy maker Ewald Nowotny has warned that three generations without war in western Europe have created a potentially dangerous imbalance in the economy.


“The fortune of a now 74-year period of peace has inevitably led to a tremendous accumulation of wealth on the one hand and debt on the other,” the Austrian central-bank governor said in an interview with Wiener Zeitung. “In the past, wars or high inflation have effectively taken care of this problem. How we solve it without both these factors remains open.”


Nowotny, who himself is 75 and was born during World War II, steps down at the end of this month after more than a decade sitting on the ECB’s Governing Council. That period has seen the central bank cut interest rates to record lows below zero and pump trillions of euros into the financial system to try to revive inflation and economic growth. It is widely expected to cut rates again when it meets next month.


Central bankers are still debating why so much stimulus is failing to ignite much inflation. In the meantime, the strategy has drawn accusations that it is effectively robbing savers — an allegation that resonates in nations such as Austria and Germany — and pumping up the wealth of investors, as well as the question of how the monetary authority can extricate itself.

Nowotny, a professor of economics, hinted that the historical view is a theme he may return to when he retires from the ECB.

“There is this academic debate, but it’s somewhat different if one also carries a monetary policy responsibility,” he said. “I currently carry that responsibility and so I’m on the cautious side. In a few days I’ll be back on the academic side, then I can think more wildly.”