Thursday

27th Feb 2020

'Be patient,' ECB chief tells Germany

  • Draghi: "We don't have public admissions of guilt, Mao-Chinese style, as way of working". (Photo: ECB/Flickr)

The European Central Bank (ECB) has announced on Thursday (19 January) that it will keep its current monetary policy unchanged and defended it against growing German criticism.

The ECB maintained its base interest rate at 0 percent and its deposit rate at -0.4 percent.

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

It also confirmed that its €80-billion per month bond-buying scheme would continue until March and reduced to €60-billion per month until December.

The eurozone's bank president Mario Draghi said at a presse conference in Francfort that he expected the rates to "remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases."

He added that the so-called quantitative easing (QE) scheme would continue after December "if necessary, and in any case" until inflation in the eurozone comes back to the bank's objective of "under but close to 2 percent".

Draghi said that inflation could rise in coming months, due in particular to higher oil prices as well as the ECB's policy.

He added that a "very substantial degree of monetary accommodation" was still needed and insisted that the ECB was pursuing the right policies.

He said that in their meeting, the bank's governors were "unanimous in looking back at the decision taken in December [the QE extension until December] and stating they were the right policy answers."

He said that it was "increasing[ly] clear that this policy stance has been successful".

Unanimity of the banking heads included Germany's Bundesbank president Jens Weidmann, amid criticism of the ECB's policies by the country's finance minister Wolfgang Schaeuble just days before the meeting.

"I would much prefer it if interest rates were not so low," Schaeuble told The European magazine last week. He added in an interview to Sueddeutsche Zeitung that "it would presumably be right if the ECB dared to exit this year" what he called an "ultra-expansionary monetary policy".

In response Draghi said that critics had to be "patient".

"Low rates are necessary now to get higher rates in the future. It's in the interest of everybody, including Germany," he said.

He said that "recovery of the whole eurozone is in the interest of German citizens" and the low rates would "disappear faster as the recovery happens faster".

He insisted that "benefits will occur for all citizens of the eurozone, including the German citizens," whether they are savers, borrowers or entrepreneurs.

'Too early' to comment on Trump

It is not the first time that Draghi and Schaeuble, two of the eurozone's most powerful officials, are at loggerheads over which monetary policy to pursue.

Last year, after Schaeuble had said that low rates caused "extraordinary problems" for German banks and private pensions, Draghi had pointed out that his institution's mandate was "to pursue price stability for the whole of the eurozone and not only for Germany".

Further defending his policies, the ECB chief said on Thursday, "we don't have public admissions of guilt, Mao-Chinese style, as a way of working".

Asked about incoming US president Donald Trump's remark that the dollar is "too strong" and "it’s killing us", Draghi noted that there is a "very strong international consensus to refrain from competitive devaluations".

He added however that it was "too early" to comment on the consequences of Trump's policies.

"Let's see what are the real policies following the statements. I'd rather comment on policies than just statements," he said.

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.

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.

Opinion

Audit the ECB

The European Central Bank's ultra easy monetary policy is not working, with greater transparency needed into the bank's decision-making process.

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. WHO on coronavirus in Europe: 'be prepared'
  2. Frontex hits activist pair with €24,000 legal bill
  3. Turkish jets keep violating Greek airspace
  4. 'Fragmented' Slovakia goes to polls amid corruption woes
  5. EU development policy needs a fresh start
  6. EU critical of China on Swedish dissident publisher
  7. NGOs urge EU to tackle meat consumption 'problem'
  8. Coronavirus: voices from a quarantined Italian town

Join EUobserver

Support quality EU news

Join us