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In the recent two decades, many service sector companies like banks altered their services and fees towards a regime whereby customers either bank online on their own or face comparatively high fees. The current phase of interest rates close to zero or even below due to the euro crisis enhances this trend. Many commercial banks in Germany have increased their fees for current accounts significantly, the common "free current account" policy has come more or less to an end. Many of the pensioners in Germany there are more than 20 million retirees are affected, because their pensions are quite low and they are not familiar with doing their banking the online way. This paper analyzes the situation based upon statistical data and develops other fee structures which are more just, from a social point of view, than burdening the elderly with low incomes. 1. Economic crisis and the role of the ECB In the autumn of 2008, the financial crisis reached a peak, when Lehman Brothers Holdings Inc., one of the biggest American investment banks, had to file for bankruptcy. There was cause for concern that many banks in Europe could file for bankruptcy too. The European states were quarrelling about how to meet the crisis, which (fiscal) measures should be taken in order to save European banks and how to boost the European economy again. In contrast to the European states, the European central bank (ECB), acted swiftly and put into place a very accommodating monetary policy. The ECB was, however, also criticized for this. The main allegation was and furthermore still is, that the main objective of the ECB would be jeopardized. The primary objective of the ECB is to maintain price stability, as defined in Article 127(1) of the Treaty on European Union: “Without prejudice to the objective of price stability, the ECB shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty on European Union.” Article 3 (3) of the Treaty on European Union: “The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress and an high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.” In 1998 the Governing Council of the ECB announced the quantitative definition of price stability: “Price stability shall be defined as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%. Price stability is to be maintained over the medium term”. The Governing Council further clarified that, within the definition, it aims to maintain 1 Professor, University of Public Administration and Finance Ludwigsburg, Reuteallee 36, 71634 Ludwigsburg, Germany. Email: sievering@hs-ludwigsburg.de 70 CEE e|Dem and e|Gov Days 2017 inflation rates “below, but close to, 2% over the medium term”. By referring to “an increase in the HICP of below but close to 2%” the definition makes clear that not only inflation above 2%, but also deflation is inconsistent with price stability. In the pursuit of price stability, the Governing Council’s explicit aim is to maintain the inflation rate at a level below, but close to, 2%. [1] In the last few years the inflation rate in the euro area was and is, well below the 2% (see table 1). The setting of an objective for monetary policy in a monetary union also takes into account the existence of inflation differences across regions in the union which operate at different stages of economic development. Inflation differences between the euro area countries are moderate. year Inflation rate (euro area) 2013 1,3 % 2014 0,4 % 2015 0,0 % 2016 0,2 % Table 1: Rate of inflation in the euro area [2] Without prejudice to the primary objective of price stability, the ECB has to support the general economy. The rate of inflation is low. So, according to Article 3, the ECB shall “support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union” which include, inter alia, “full employment” and “balanced economic growth”. A closer look at the statistics indicates a relatively high unemployment rate and a weak economic growth in the euro area. Due to the financial and economic crisis, the number of unemployed persons in the euro area has risen considerably. In 2007, the unemployment rate in the euro area was still at 7.4%. It rose to 12.0% in 2013 and then declined to 10.9% in 2015. The following countries have particularly high unemployment rates (2015): Greece (24.9%), Spain (22.1%), Portugal (12.6%) and Slovakia (11.5%). In contrast Germany (4.6%), Malta (5.4%) and Austria (5.7%) have particularly low unemployment rates. [3] The gross domestic product (GDP) in the euro area has risen only slightly in recent years: In 2012 and 2013 the rate of growth was even negative: 2012 (-0.9 %), 2013: (-0.3 %), 2014: (+1.2 %) and 2015: (+ 2.0%). Greece has recorded significant growth slumps in the year 2011 (-9.1%) and 2012 (-7.3%). [4] 2. Important instruments of ECB In order to achieve the objectives mentioned above, the ECB has at its disposal a set of monetary policy instruments, in particular it conducts open market operations and standing facilities. 2.1 Open market operations Open market operations play the most important role in the monetary policy of the ECB. They are used for steering interest rates and for managing the liquidity situation in the market. With these operations the ECB lends funds to commercial banks. The ECB can set the main conditions: the interest rate and the amount of money. Since October 2008 and the collapse of Lehman Brothers, a full allotment procedure was introduced. No longer is allocation volume fixed in advance. Each commercial bank receives the amount of “base money” it needs. Furthermore the ECB reduced the main interest rate over the years to 0% in 2016, an historically low level. (see table 2) CEE e|Dem and e|Gov Days 2017 71 2.2 Standing facilities For the purpose of controlling short-term interest rates in the money market, the euro system also offers two standing facilities to commercial banks: the marginal lending facility and the deposit facility. Both facilities have an overnight maturity and are available to commercial banks on their own initiative. [5] Commercial banks can use the “marginal lending facility” to obtain overnight liquidity from the national central banks for eligible assets. There are no credit limits or other restrictions on commercial banks access to the facility apart from the requirement to present sufficient underlying assets. The interest rate on the marginal lending facility normally provides a ceiling for the overnight market interest rate. Commercial banks can use the “deposit facility” to make overnight deposits with the national central banks. There are no deposit limits or other restrictions. The interest rate on the deposit facility normally provides a floor for the overnight market interest rate. As the overall amounts requested by banks were higher than the liquidity needs of the banking system during this period, the excess liquidity was placed in the deposit facility by many commercial banks. However, the ECB does not want the excess liquidity to be re-invested in the deposit facility. The ECB would prefer to see this money lent to companies and to individuals in order to stimulate the economy. The ECB did not want to forbid the use of the deposit facility but has made this instrument unattractive. For the first time in history, the ECB set a negative (!) interest rate. The deposit rate currently stands at 0.4%. Now, commercial banks must pay an interest rate for placing short term money at the ECB. The interest rate on the marginal lending facility is normally substantially higher than the corresponding money market rate and the interest rate on the deposit facility is normally substantially lower than the money market rate. By setting the rates on the standing facilities, the Governing Council effectively determines the band within which the overnight money market rate can fluctuate. Selected years Main interest rate deposit facility rate marginal lending facility rate 31.12.2007 4,0 % 3,0 % 5,0 % 31.12.2008 2,5 % 2,0 % 3,0 % 31.12.2009 1,0 % 0,25 % 1,75 % 31.12.2013 0,25 % 0,0 % 0,75 % 31.12.2014 0,05 % -0,2 % 0,3 % 31.12.2016 0,0 % -0,4 % 0,25 % Table 2: Development of the ECB key interest rates since 2007 [6] Table 2 shows the development of key interest rates since 2007. The general decline in interest rates is noticeable. Also noticeable is the spread between the interest rates, it becomes much closer, from 3,0 % and 5,0 % in 2007 to -0,4 % and 0,25 % in 2016. 2.3 Transmission mechanism of monetary policy With low interest rates, the ECB is pursuing certain perceptions of its effects. The process through which monetary policy decisions affect the economy is known as the transmission mechanism of monetary policy. It is a (long) chain of causes and effects linking monetary policy decisions with 72 CEE e|Dem and e|Gov Days 2017 real economic data. The chain starts with a change in the official interest rates set by the ECB. [7] Changes in money market rates in turn affect other interest rates, albeit to varying degrees. Changes in money market rates also have an impact on interest rates set by banks on short term loans and deposits. It affects savings, spending and investment decisions of companies and households. Lower interest rates tend to make it more attractive for households and companies to take out loans in order to finance their consumption or investment. This will increase GNP and the unemployment rate can be reduced. This transmission process is, however, very long and its effects are uncertain. In so

Economic effects of the digital divide on pensioners in Germany regarding retail banking services