- Title: Draghi rejects German criticism, calls on Berlin to pull its weight
- Date: 28th September 2016
- Summary: BERLIN, GERMANY (SEPTEMBER 28, 2016) (REUTERS) ****WARNING CONTAINS FLASH PHOTOGRAPHY*** EUROPEAN CENTRAL BANK PRESIDENT MARIO DRAGHI AND BUNDESTAG PRESIDENT NORBERT LAMMERT ARRIVING FOR MEETING WITH GERMAN LAWMAKERS LAWMAKERS SEATED DRAGHI SHAKING HANDS AND WALKING TO SEAT VARIOUS OF DRAGHI AND GERMAN CONSERVATIVE LAWMAKER, GUNTHER KRICHBAUM TALKING DRAGHI AND KRICHBAUM SITTING DOWN FOR MEETING WITH LAWMAKERS ROUND TABLE DRAGHI SEEN THOUGH PRESS MEETING SEEN THROUGH WINDOW DRAGHI AND KRICHBAUM ARRIVING FOR NEWS CONFERENCE (SOUNDBITE) (English) EUROPEAN CENTRAL BANK PRESIDENT, MARIO DRAGHI, SAYING: "And I made the point that our measures are effective, that we see the effectiveness in the recovery that is proceeding, the modest but steady pace. We see that is effective because of the improvements in the labour market where the unemployment rate continues to decrease." NEWS CONFERENCE IN PROGRESS (SOUNDBITE) (English) EUROPEAN CENTRAL BANK PRESIDENT, MARIO DRAGHI, SAYING: "I had the opportunity also to express my awareness, our awareness for these risks. So the ECB is sensitive to these risks and to the people's concerns for the low interest rates." PEOPLE AND MEDIA LISTENING NEWS CONFERENCE IN PROGRESS (SOUNDBITE) (English) EUROPEAN CENTRAL BANK PRESIDENT, MARIO DRAGHI, SAYING: "Where we have to acknowledge that banks as a category are very heterogeneous, there are banks of one kind that can well resist periods of low interest rates for a long time and other banks that actually are more effected. We also said that many banks had problems that don't have to do primarily, or some banks have problems that don't have to do primarily with a low level of interest rates but possibly with other reasons. Either business model or risk management." NEWS CONFERENCE IN PROGRESS DRAGHI SEEN THROUGH VIEWFINDER (SOUNDBITE) (English) EUROPEAN CENTRAL BANK PRESIDENT, MARIO DRAGHI, SAYING: "The ECB would continue until it has reached its objective, namely of an inflation rate for the eurozone which is close but below two percent in the medium term." NEWS CONFERENCE IN PROGRESS (SOUNDBITE) (English) EUROPEAN CENTRAL BANK PRESIDENT, MARIO DRAGHI, SAYING: "I think that, I would say that the concerns are general to all savers that see their returns on their savings being sacrificed by the low interest policy. But I think that the situation in Germany is different and the volume of these concerns, the vocality of these concerns is certainly higher in Germany." VIEW OF RIVER SPREE OUTSIDE BUILDING NEWS CONFERENCE SEEN FROM ABOVE (SOUNDBITE) (English) EUROPEAN CENTRAL BANK PRESIDENT, MARIO DRAGHI, SAYING: "I don't share this view, and in fact you said why! If a bank represents a systemic threat for the eurozone this cannot be because of low interest rates, it has to do with other reasons." DRAGHI'S HANDS (SOUNDBITE) (English) EUROPEAN CENTRAL BANK PRESIDENT, MARIO DRAGHI, 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. I have never argued for irresponsible fiscal expansion." NEWS CONFERENCE IN PROGRESS (SOUNDBITE) (English) EUROPEAN CENTRAL BANK PRESIDENT, MARIO DRAGHI, SAYING: "I am sorry but I won't comment on individual institutions. I have said that also in the previous debate, for the sake of our so-called separation principle I would not comment on individual institutions." NEWS CONFERENCE IN PROGRESS DRAGHI AND KIRCHBAUM SHAKING HANDS AND LEAVING
- Embargoed: 13th October 2016 17:41
- Keywords: European Central Bank Mario Draghi lawmakers policy German parliament
- Location: BERLIN, GERMANY
- City: BERLIN, GERMANY
- Country: Germany
- Topics: Debt Markets,Economic Events
- Reuters ID: LVA00151HBGAV
- Aspect Ratio: 16:9
- Story Text:European Central Bank President Mario Draghi rejected German criticism of the bank's super-loose monetary policy on Wednesday (September 28), calling sub-zero interest rates a necessity and urging Berlin to share the burden with more spending.
"I made the point that our measures are effective, that we see the effectiveness in the recovery that is proceeding, the modest but steady pace. We see that is effective because of the improvements in the labour market where the unemployment rate continues to decrease," Draghi told reporters after a closed-doors grilling by German lawmakers.
Draghi also said the bank's low interest rate policies were not to blame for problems at German banking giant Deutsche Bank.
"If a bank represents a systemic threat for the euro zone this cannot be because of low interest rates, it has to do with other reasons," he said.
Michael Kemmer, the head of Germany's BdB banking association, earlier on Wednesday told Deutschlandfunk radio that the ECB's low interest rate policy was partly responsible for the current problems that Deutsche Bank and Commerzbank are facing.
Deutsche is fighting a fine of up to $14 billion from the U.S. Department of Justice and concerns over its stability had pushed shares to a record low on Tuesday (September 27).
Asked if the German government should rescue Deutsche Bank, Draghi said he did not comment on individual lenders.
Questioned by lawmakers who say the ECB's monetary policy has damaged the euro zone and fuelled the rise of right-wing populists, Draghi said Germans were actually net beneficiaries of the ECB's policies and that it was also up to the German government to lift growth, a precondition for rates to rise.
After repeated clashes in recent years, a tentative truce between the bank and Europe's biggest economy is showing signs of cracking as the ECB contemplates even more stimulus despite vocal objections from the German establishment.
Facing lacklustre growth and the threat of deflation, the ECB has slashed rates into negative territory and so far bought more than a trillion euros' worth of government bonds to cut borrowing costs and revive spending by firms and households.
But many in financially prudent Germany argue that sub-zero rates upset financial stability, consume household savings, destabilise banks and reward financial mismanagement by euro zone governments.
The ECB's calls for more government spending annoy Germany, where balancing the budget is a national obsession and a cornerstone of finance minister Wolfgang Schaeuble's economic strategy.
The heart of the problem is that German households prefer uncomplicated savings products that now yield nothing, eating into the retirement prospects of millions and endangering hundreds if not thousands of small savings banks.
With the euro zone economy responding to stimulus more slowly than expected, the ECB is now looking at fresh options. To German ire, markets are pricing in a six-month extension to its 80 billion euros per month of asset purchases.
The ECB argues that Germany relies too much on exports, neglecting its internal market and running up huge trade surpluses without recognising that its economic good fortune may not last. More spending at home would balance the German economy and trickle down to the rest of the euro zone, helping the entire bloc, it argues.
- Copyright Holder: REUTERS
- Usage Terms/Restrictions: None