European Central Bank President Mario Draghi faces tough questions from German lawmakers about the bank’s ultra-loose monetary policy, just as the ECB is considering even more stimulus to revive inflation. David Pollard reports.
German lawmakers quiz Draghi
The handshake’s cordial, even as Mario Draghi prepares for battle.
The ECB chief in Berlin to defend his ultra-loose monetary policy.
Policy that here, among members of Germany’s Bundestag, has its enemies.
Low rates, some claim, eroding savings, destabilising banks – and delaying the imperative for reform.
(SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING:
“There is an ideological opinion in Berlin that by providing very very loose money you are taking effectively – and I hate the historical imagery this presents – but you’re taking the boot off the throat of politicians elsewhere in Europe to do the very difficult very structural reforms.”
Draghi spoke behind closed doors after these pictures were taken.
Low rates necessary, he said, for a return to higher rates in the future.
Time needed – to allow the ECB’s measures to take effect.
That a hint perhaps that more not less monetary policy could be needed.
Governments, he said in a press conference afterwards, must do their bit – but adding a subtle qualification.
(SOUNDBITE) (English) MARIO DRAGHI, ECB PRESIDENT, SAYING:
“Countries that have fiscal space should use it – and Germany does have fiscal space. Now, however, we have to be nuanced about this because Germany is also close to full employment. So if there is fiscal space for some fiscal expansion, it should be carefully targeted.”
Even more necessary, say economists, if monetary policy is running out of steam.
With German business morale at a 28-month high, something the German economy is not doing.
German institutes are now expected to revise their 2016 growth outlook UP from 1.6 to 1.9 per cent.
German consumers and exporters still reaping the rewards of cheap money and a low single currency Draghi’s fans see as his handiwork.