EUROPEAN CENTRAL Bank president Mario Draghi has a problem in Germany. Less than half of Germans trust the Italian-born banker, according to a poll, while a member of Germany’s ruling coalition has dubbed him the euro zone’s “counterfeiter-in-chief”.
The source of German ire is the plan, unveiled by Mr Draghi last week, to stabilise the euro zone with unlimited ECB bond-buying.
To address the situation, Mr Draghi made an unusual approach yesterday to the German parliament. “I must do more to explain our measures,” he said.
“If the Bundestag were to invite me, I would gladly come – it would be a good opportunity to clarify what we are doing.”
Bundestag officials noted his request yesterday, and added that addressing the main chamber is an honour usually reserved for foreign leaders. Petra Merkel, head of the Bundestag’s budgetary committee, said that Mr Draghi would receive an invitation in the coming days to address her members.
Opposition to the ECB bond-buying programme in Germany, led by the Bundesbank, centres around fears that such purchases are tantamount to forbidden state financing. The knock-on risk: greater inflation and devalued savings.
There is a second, political, concern: that any external interventions to reduce borrowing costs for crisis countries reduce also their incentive to reform.
Mr Draghi argued that it was no longer possible to avoid intervention because reform gains in crisis countries were being swallowed up by spiralling borrowing costs.
“Not acting would be much riskier,” he said, adding that no ECB aid would come unless reforms were maintained.
Acknowledging the stand-off with Frankfurt’s other central bank, and its president Jens Weidmann, Mr Draghi said the rest of the ECB board did not share its fear of inflation.
“It would be nice if we could always work together with the Bundesbank,” said Mr Draghi, “but currently we have different views about how the crisis should be overcome.” He said that, even before its activation, the mere announcement of bond-buying was having a positive effect with “fund managers bringing their money back to Europe”.
Spanish 10-year bond yields are down below 6 per cent after highs of nearly 8 per cent in July, while Italian yields are near 5 per cent after approaching 7 per cent.
German finance minister Wolfgang Schäuble made an effort to arbitrate between the two banks yesterday. He expressed his confidence that the ECB’s bond-buying programme would not breach its mandate, while adding that he “respected” the Bundesbank opposition.
Mr Schäuble suggested that German fears of “unlimited” ECB bond-buying were understandable but based on a misunderstanding.
“The fact that the ECB doesn’t name a is because, if they did, it would be an invitation for speculators,” he told German radio.
“One can understand the political debate as a worry of unlimited bond-buying. That would, of course, be a slippery slope. But we’re not there, and we wouldn’t accept it if we were as it would breach the ECB mandate, overseen by the European Court of Justice.”
