BERLIN, Sept 8 (Reuters) - The head of Germany’s Ifo economic institute warned of a return of the euro crisis in a newspaper interview published on Friday, and said the European Central Bank should start to roll back its zero-interest-rate policy.
Ifo head Clemens Fuest told the Passauer Neue Presse newspaper that a noticeable recovery in the euro zone, increasing inflation rates and rising prices for bonds, shares and real estate were reasons for the ECB to change course.
“The longer this continues, the more painful it will be when the money dries up,” Fuest told the newspaper. “It’s time to start the exit process.”
The ECB on Thursday reaffirmed its ultra-easy policy stance and kept the door open to increasing bond purchases if needed, despite the euro zone’s best economic run since the global financial crisis.
Fuest said he agreed in principle that the ECB’s policy had been necessary given low inflation and weak economies in the euro zone, but the situation has changed.
Many countries in the euro zone have significantly higher debt now than before the last euro crisis, and banks in some countries were still not as stable as desired, he said. Moreover, banks could still acquire sovereign bonds without equity guarantees.
“That is why it should be expected that the crisis will return in the next recession,” he said.
Reporting by Andrea Shalal; Editing by Leslie Adler