Tension grew yesterday between Germany and the European Central Bank as chancellor Angela Merkel said debate on record low interest rates was legitimate shortly after Mario Draghi struck back at the bank’s critics in Berlin.
Mr Draghi issued a forceful defence of the bank’s independence, saying its policymakers obeyed the law and not politicians. “Criticisms of a certain type could be viewed . . . as endangering the independence of the ECB.”
Such remarks reflect disquiet in Frankfurt about political attacks on the bank’s stimulus campaign, but Dr Merkel entered the fray only hours later to say debate should not be confused with intervening in independent ECB policy.
“That people in Germany are talking about ECB rates being higher in the past – that this has certain effects – I think is legitimate,” she said.
Growth and inflation
As the ECB kept its main rate steady at zero, the line from the Merkel administration was clear. On a flying visit to Dublin, German deputy finance minister Jens Spahn said the problem of “too-low” growth and inflation could not be solved by the ECB.
"That is our responsibility as states and politicians. We need fiscal policy and, especially, structural reforms," he told The Irish Times in an interview. "Especially for the Germans it's very important that the ECB is an independent institution. It's what we wanted actually out of our Bundesbank tradition and we still want this principle to be there.
“But it must be allowed to discuss the side-effects of low interest rates, and there are . . . side-effects when it comes to the savings of the people.
Need to reform
“And it comes to the situation of the banks: how much money they can make? Even when it comes to the pressure on those countries that actually need to reform, there is less pressure then.”
At its last policy meeting, the ECB took its deposit rate deeper into negative territory and expended its sovereign monthly bond-buying programme by one-third to €80 billion.
As the bank said purchases of corporate debt would start in June, Mr Draghi insisted the quantitative easing programme was working and interest rates would remain at record low levels for a long time.
He was responding to increasing criticism of low interest rates from German savers and banks, criticism which intensified in the last fortnight when finance minister Wolfgang Schäuble joined the debate. Mr Schäuble has gone so far as to suggest ECB policy was partly to blame for the rise of the right-wing anti-euro Alternative for Germany.
But Mr Draghi said attacks on the bank could blunt its efforts, leading only to yet more ECB action. “The result . . . is that it will take longer . . . to produce the results that we want.”
