As the late, widely-respected Hans Tietmeyer stated back in 1998: “Die Geldpolitik kann den anderen Politikbereichen – weder der Finanz- noch der Sozial- und Lohnpolitik – ihre Aufgaben nicht abnehmen”. It now becomes time to rebalance the policy mix away from demand stimulus through unprecedented monetary accommodation, towards measures aimed at improving the longer-term outlook.
It is crucial to continue strengthening competition in labour and product markets, for example, through liberalisation and deregulation, to improve the efficiency of price signals. National fiscal policies also provide important instruments. They can react to shocks in such a way as to counteract the emergence of differentials.