Mario Draghi has hit back hard at German criticism of low interest rates, insisting the European Central Bank does not take orders from politicians.
Speaking as the bank kept its benchmark interest rate at zero, the ECB president warned that challenges to its independence would dent confidence in the eurozone’s recovery and force policymakers to keep rates lower for longer.
“We have a mandate to pursue price stability for the whole of the eurozone, not only for Germany,” he said. “We obey the law, not the politicians, because we are independent, as stated by the law.”
Some of Germany’s top politicians, including Wolfgang Schäuble, finance minister, have partly blamed the rise of the rightwing Eurosceptic Alternative for Germany party on the ECB’s low interest rates — although Mr Schäuble later backtracked. Critics have accused the bank of expropriating savings.
In a swipe at eurozone politicians’ reluctance to undertake structural reforms and boost fiscal spending, Mr Draghi said: “With rare exceptions, monetary policy has been the only policy in the last four years to support growth.” He said eurozone growth would have been measurably less had it not been for his central bank’s actions over the past two years.
Mr Draghi also said that the governing council was “unanimous in defending the independence of the ECB and the appropriateness of the current monetary policy stance” in a brief discussion at yesterday’s meeting.
The ECB council kept the deposit rate on lenders’ reserves parked at the central bank at minus 0.4 per cent.
Low interest rate policies have hit savers in Germany, as well as the smaller German banks that rely heavily on interest income for profits. German life insurers, which guarantee minimum returns on investments, have also been hit. Mr Draghi said their business model and the regulatory environment were the prime cause of their troubles.
Higher growth and inflation were, he said, “the necessary conditions for the return of interest rates to a higher level than today”.
The rate hold was widely expected after the substantial stimulus the eurozone’s central bank unleashed in March. Mr Draghi said the stimulus was working, though risks to the economy remained “on the downside”.