German Finance Minister Says Results of U.S. Stimulus Are 'Horrendous'

Nov. 5, 2010— -- Germany is not impressed. One day after the United States Federal Reserve announced that it would pump $600 billion into America's banking system over the next eight months, German Finance Minister Wolfgang Schäuble sharply criticized the decision.

"I don't think they are going to solve their problems that way," Schäuble told German public broadcaster ZDF in a Thursday evening interview. "They have already pumped an endless amount of money into the economy via taking on extremely high public debt and through a Fed policy that has already pumped a lot of money into the economy. The results are horrendous."

In a separate interview on public broadcaster ARD, Schäuble said that the move by Fed Chair Ben Bernanke would "create additional problems for the world." He promised to bring up the issue in talks with the US and said that, by following such a monetary path, the US was violating a pledge that all industrialized countries agreed to at the last G-20 summit in Toronto in June.

The Fed's plan envisions the purchase of US government bonds in an effort to lower long-term interest rates as a way to stimulate borrowing and investment. In a contribution to the Washington Post, Bernanke emphasized that the move was designed to help strengthen the US job market and reduce an unemployment level that has stagnated at 10 percent. "This approach eased financial conditions in the past and, so far, looks to be effective again," Bernanke wrote, referring to rising stocks and dropping interest rates this week.

Bernanke acted just a day after the Democrats of President Barack Obama took a beating in Tuesday's mid-term elections -- a vote which cost the party its majority in the House of Representatives. One of the Republicans' main complaints during the campaign focused on high deficits as a result of Obama's economic stimulus program. Despite recent hints from the White House that further stimulus measures might be in the offing, Tuesday's likely eliminates the possibility that Obama can push through further legislation to stimulate the economy.