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German finance minister sees signs ECB will raise rates

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German finance minister: future aid to Greece will be much smaller than existing bailout deals

Protesters from a coalition of groups demonstrate the conviction of Wikileaker Bradley Manning late August 21, 2013 in front of the White House in Washington, DC. A US military judge sentenced Army Pfc. Bradley Manning to 35 years in prison August 21, 2013 for leaking hundreds of thousands of classified documents to the anti-secrecy group WikiLeaks AFP PHOTO/Paul J. RichardsPAUL J. RICHARDS/AFP/Getty Images

we will have to concern ourselves in the middle of next year with new measures for Greece. A new IMF working paper offered a different explanation of why the lending agency erred in underestimating the impact of austerity measures on Greeces economy. In June, the IMF said it had miscalculated the effect that cutting government spending would have on the Greek economy and that this had worsened the countrys deep recession, now in its sixth year. A new working paper released this week said gross domestic product forecast errors for Greece were due more to over-optimism on potential growth and less to do with misjudging the impact of spending cuts. The paper also blamed Greeces government in part for failing to implement changes in the structure of the economy more quickly and efficiently and added that political and social upheaval also undermined progress. Copyright 2013 The Associated Press.

That cannot last forever – even if it is a relief to the federal budget,” he said. “The central bank has announced it will raise rates again when the economy improves. That is good.” ECB chief Mario Draghi actually said after the last meeting on rates on August 1 that rates will remain low for some time. The ECB has based this ‘forward guidance’ on the inflation outlook remaining subdued, and growth weak.

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