ECB president Draghi hits out at German critics

Mario Draghi also denies rumours he will return to Rome

Mario Draghi has dismissed speculation that he could leave Frankfurt and return to Rome as successor to departing Italian president, Giorgio Napolitano

Mario Draghi has dismissed speculation that he could leave Frankfurt and return to Rome as successor to departing Italian president, Giorgio Napolitano

 

ECB president Mario Draghi has hit out at the many German critics of his bank’s monetary policy and denied rumours he will depart Frankfurt to become Italy’s next president.

A week before the ECB is expected to launch a programme of quantitative easing, Mr Draghi told “Die Zeit” that it was time for Germans to understand that they were not the only ones in the eurozone.

“We are not here to create a benefit for one country or another, or to punish German savers,” he told Die Zeit weekly, in an interview to appear on Thursday.

Mr Draghi’s honeymoon period in Germany expired soon after taking office in Frankfurt in 2011. Now he is the focus of sustained attack from German politicians, economists and sections of the media, who accuse him of betraying the ECB mandate with monetary policy that prioritises the needs of southern Europe ahead of northern members, in particular Germany.

Asked if this criticism hurt him, Mr Draghi responded “Yes.”

He recalled that the ECB was “founded in the tradition of the Bundesbank”, yet implied that many Germans seemed to think this meant it should follow whatever line Frankfurt’s other central bank feels approriate.

But the ECB president recalled that his institution is responsible for 19 countries and not just one.

“This is the message that some in Germany need to understand,” said Mr Draghi, adding it was a challenge to make this point clear even in regular conversations with Gemran politicians and officials.

In the euro crisis, and again in recent weeks, the ECB and Bundesbank have been at odds over core pillars of monetary policy.

Mr Draghi accuses his German critics of ignoring the facts about the challenges facing the euro area. Bundesbank president Jens Weidmann, Mr Draghi’s loudest critic, has accused the president of going too far with monetary policy that risks the bank’s political independence.

Mr Draghi portrayed the debate as the collision between “belief and truth”.

“When belief and proof meet, proof often has no chance,” said Mr Draghi. “The simplication of the discussion in many quarters is, in truth, a flattening of the discussion that leads to false conclusions.”

A common accusation of critics, he said, was that Draghi-era ECB monetary policy had lead to considerable losses for its shareholders. This was not the case, he said, saying the ECB had never made a loss but instead generated profit, which was passed onto its members.

“The Bundesbank too, which passes it onto the finance ministry thus onto the German citizens,” he said.

The ECB president said that all members of the ECB governing council were determined to live up to their mandate, but there were “naturally” differences over how best to achieve that.

“But it’s not as if he we have endless possiblities,” he said.

Such remarks appear to support expectations hat the council will back a programe of Quantitative Easing (QE) at its next meeting on January 22.

ECB officials are anxious that a bond-buying programe supports growth and fights the danger of deflation. With inflation well short of its target of at or just below two per cent, Mr Draghi said the bank had much to do.

“The (ECB) has to keep interest rates low and work towards an expansive monetary policy hat accompanies growth,” he said.

But his German critics are unlikely to be convinced by Mr Draghi’s outspoken remarks in “Die Zeit”.

Earlier this week ECB director Sabine Lautenschläger said she was “not convinced” by the case in favour of the bank adopting a large-scale QE programe.

The benefits of such a programme did not outweight the risks, she argued in “Der Spiegel” magazine, nor did she see the bloc facing “unusual risks” that would justify such a step.

Ms Lautenschläger, who joined the ECB last year from the Bundesbank, brushed off concerns about negative inflation rates, blaming strong falls in the costs of energy and food.

“I cannot recognise at present that consumers have to reckon with permanently falling prices and are changing their purchase patterns,” she said.

Hopes that ECB intervention through QE would boost lending at southern European banks in southern Europe were unlikely, she said, but could instead have unintended consequences.

“I ask myself whether ... (QE) encourages governments to once again run up more ebt rather than pushing for a sustainable budget and economic policy,” she said.

Meanwhile Mr Draghi dismissed speculation that he could leave Frankfurt and return to Rome as successor to departing Italian president, Giorgio Napolitano.

“Naturally it is a great honour to be considered but it is not my job,” he said, adding that his current job was important to him.

“I am happy to be able to do it,” he said, “and will continue to do it.”