German Finance Minister Emphasizes Importance of Central Bank Independence

Central Bank Independence and Global Cooperation

By Maria Martinez

Challenges in U.S.-Europe Relations

WASHINGTON, Jan 12 (Reuters) - German Finance Minister Lars Klingbeil said on Monday that central bank independence was a "clear line" for him when asked about the U.S. Justice Department's probe into Federal Reserve Chair Jerome Powell. 

G7 Discussions on Rare Earths

"We in Germany attach great importance to the independence of central banks," Klingbeil said in Washington. "For me, as finance minister, this is a clear line."

Europe's Strategy for Critical Materials

President Donald Trump's administration has ramped up its pressure campaign on the Federal Reserve, threatening to indict Powell over comments he made to Congress about a building renovation project. 

Powell has called the action a "pretext" to gain more influence over interest rates, which Trump wants cut dramatically.

The German finance minister added that this is not a new conflict. "This conflict has been going on for some time now, and we are aware of it," Klingbeil said.

The finance minister, who described himself as "very transatlantic", said Germany is doing everything it can to stay in dialogue with its American partners, but discussions are becoming more difficult and differences are getting larger. 

"I believe it is bad for the world if Europe and the U.S. are divided from one another, and that is why I am here, to send a clear signal: We want cooperation, we want collaboration," said Klingbeil. 

G7+ SEEKS TO CUT RELIANCE ON CHINESE RARE EARTHS

The German minister is in Washington for a meeting of finance ministers from the Group of Seven advanced economies, in which Australia, Mexico, South Korea and India will also participate. Together, the grouping accounts for 60% of global demand for critical minerals.

Western countries are looking to reduce their dependence on China given moves by Beijing to impose strict export controls on rare earths.

One option that will be discussed is price floors for rare earths, a minimum price ensuring producers outside of China receive at least that level even if market prices fall due to China's dominance and ability to flood markets with supply.

Klingbeil welcomed the discussion on price floors, saying Europe needs to build up production, and for that, a certain price level is needed.

"However, what I do not want is that we collaborate with some states and pursue policy against third parties," Klingbeil said, warning against an anti-China coalition.

The U.S. is expected to issue a statement after the meeting, but no specific joint action is likely, an official told Reuters.

"I do not expect that we will fully untie the knot today," Klingbeil said after a dinner on Sunday evening that kicked off discussions. "That's not how it works at the international level, not on such an important topic."

EUROPE MUST ACT TO AVOID BECOMING A RARE EARTHS PAWN

Apart from joining forces with partners on how to secure access to critical materials, Klingbeil said Europe also needs to move faster on building up production to avoid becoming a "pawn" when it comes to access to important raw materials and rare earths.

"What is very important to me is that we in Europe do not sit back," Klingbeil said. "Neither complaining nor self-pity helps us, we have to become active."

Klingbeil said the EU needed more financing at the bloc level, pointing to a new German raw materials fund.

The EU must also move forward urgently on recycling, Klingbeil said, citing its "big potential" for reducing dependencies and broadening supply.

(Reporting by Maria Martinez; Writing by Friederike Heine; Editing by Matthias Williams and Hugh Lawson)