Sunday

23rd Feb 2020

ECB brushes off German criticism

  • Draghi: "We obey the law, not the politicians because we are independent" (Photo: European Central Bank)

The European Central Bank (ECB) on Thursday did not change its monetary policies and vigorously defended them in face of German criticism.

"We have a mandate to pursue price stability for the whole of the eurozone and not only for Germany," ECB president Mario Draghi said at a press conference after the institution's monthly meeting.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or join as a group

"This mandate is established by the treaty and Europan law. We obey the law, not the politicians because we are independent," he said, adding that this position was unanimous within the ECB's governing council. All eurozone national central bank chiefs, including Germany's Jens Weidmann, are a member of that council.

He warned that "any time the credibility of a central bank is perceived as being put in question, the result is a delay in the achievement of its objective.”

The ECB's policy of low interest rates to fight the risk of deflation in the eurozone was recently criticised by the German finance minister Wolfgang Schaeuble.

In an interview with the Reuters press agency last week, Schaeuble said that it was "indisputable" that low interest rates were causing "extraordinary problems" for German banks and private pensions.

"That is why I always point out that this does not necessarily strengthen citizens' readiness to trust in European integration," he said.

Schaeuble was even quoted by Dow Jones reporters as telling Draghi that he could be "proud" that 50 percent of the electoral results obtained by the anti-euro and anti-immigrant party Alternative for Germany could be attributed to the ECB's policies.

On Thursday the ECB maintained the record low interest rates set last month.

The interest rate on bank, states and institutions deposits to the ECB remains in the negative at -0.4 percent.

The interest rate of the money it lends to banks for a week remains at 0.00 percent, and the rate for the overnight credit to banks at 0.25 percent.

'Our policies work'

Draghi insisted that low interest rates were "not a specificity of the eurozone" and said they were "a symptom of low growth and low inflation", not a consequence of the ECB's monetary policies.

"If we want to return to higher interest rates we have before to return to higher growth and higher inflation. And to do so we need the current monetary policy," he said.

"Our policies work, they are effective. Just give them time to fully display their effect, " Draghi also said, pointing at eurozone countries' responsibilities.

"If there were structural reforms, the effect would be quicker," he said.

He said that the ECB's monetary measures had been the "only policies in the last four years to support growth" in Europe.

"Monetary policy is not the only necessary condition for returning to structural long term sustainable growth. You have to have other conditions, first and foremost structural reforms," he said.

Moderate growth

The ECB-Germany controversy comes as prospect for the eurozone economy are still uncertain, with a limited recovery and doubts about the effect of the "bazooka" measures taken by the central bank.

In addition to the quasi-zero interest rates decided last month, the ECB also started to increase the amount of bonds it buys on market from €60 billion to €80 billion a month in order to boost economic activities.

The ECB will also launch in June a new round of loans to financial institutions and bond buying.

But eurozone growth remains "moderate but steady" Draghi admitted. It is driven by consumption and investment but dampened by global uncertainties, weak exports and slow reforms.

Draghi also said that low inflation would last for a long time and that “we have to be patient".

'Limited' Brexit impact

He cut short speculation about the ECB creating so-called "helicopter money" that would be directly pumped into the real economy.

"It's a very interesting concept ... but we haven't studied it," he said

Asked about the impact of the referendum campaign in the UK and the risk of seeing the country leaving the EU, the ECB chief said that the main victim of market concern so far had been the British pound.

He said the risk that a possible Brexit could endanger eurozone economic recovery was "limited".

Deflation fears trigger ECB's 'bazooka'

In a new attempt to revive the economy, the European Central Bank has decided to cut rates further in the negative and to step up its bond buying programme.

ECB reshapes its bond-buying scheme

The eurozone bank will prolong its quantitative easing scheme after March but will buy €60 billion of public and corporate bonds each month instead of €80 billion.

No breakthrough at EU budget summit

EU leaders failed to reach agreement on the EU's long-term budget, as richer states and poorer 'cohesion countries' locked horns. The impasse continues over how to fund the Brexit gap.

EU leaders struggling to break budget deadlock

Cuts to innovation, space, neighbourhood and other programme-spending push down the latest budget proposal on the table of EU leaders. Rebates could stay on, to win the support of the net-payers for a deal.

News in Brief

  1. Bulgarian PM investigated over 'money laundering'
  2. Greenpeace breaks into French nuclear plant
  3. Germany increases police presence after shootings
  4. NGO: US and EU 'watering-down' tax reform prior to G20
  5. Iran: parliamentary elections, conservatives likely to win
  6. Belgian CEOs raise alarm on political crisis
  7. Germans voice anger on rise of far-right terrorism
  8. EU leaders' budget summit drags on overnight

Vietnam sent champagne to MEPs ahead of trade vote

A trade deal with Vietnam sailed through the European Parliament's international trade committee and after its embassy sent MEPs bottles of Moet & Chandon Imperial champagne over Christmas.

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Stakeholders' Highlights

  1. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  2. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  3. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  4. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  5. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  6. Nordic Council of MinistersNordic Climate Action Weeks in December

Latest News

  1. No breakthrough at EU budget summit
  2. EU leaders struggling to break budget deadlock
  3. German ex-commissioner Oettinger lands Orban job
  4. How big is Germany's far-right problem?
  5. Plastic and carbon proposals to help plug Brexit budget gap
  6. Sassoli repeats EU budget rejection warning
  7. Why Miroslav Lajčák is the wrong choice for EU envoy
  8. Unhappy EU leaders begin budget haggle

Join EUobserver

Support quality EU news

Join us