“Either you do nothing — nein zu Allem,” or no to everything, and “allow the singleness of monetary policy to be undermined, or you take action,” Mr Draghi told an audience of business people in Berlin.
“The greatest risk to stability is not action, it’s inaction.”
The comments risk widening the rift between the ECB and the Bundesbank, which says bond purchases are tantamount to printing money to finance profligate governments.
In August Mr Draghi named Bundesbank president Jens Weidmann as the only ECB policymaker to vote against his bond-buying plan, breaching the established practice of keeping ECB deliberations confidential.
Since then, Mr Weidmann has sharpened his criticism of ECB policy, warning that central bank funding can “become addictive like a drug” and eventually hurt the currency through inflation.
Mr Draghi said yesterday Germans need not fear that the policy will unleash uncontrollable inflation and that the ECB remains committed to ensuring price stability.
“In exceptional times, regaining stability sometimes requires exceptional measures,” he said. “We cannot always look to the past for answers. We may need to take new steps to achieve long-standing goals.”
Mr Draghi said the ECB’s commitment to lower borrowing costs is aimed solely at restoring transmission of its interest rates and has already boosted financial-market confidence.
“We have moved to ensure price stability by removing unfounded fears about the continuance of the euro area,” he said. “There is no doubt that these measures are supporting financial market sentiment.”
Mr Draghi reiterated that the ECB will only become active if governments ask Europe’s rescue fund for aid and agree to adhere to conditions in return.
“Our measures can only build the bridge to a more stable future,” he said. “The key challenge going forward is to ensure that this immediate upturn strengthens rather than weakens” governments’ commitment to implement reforms.
Mariano Rajoy, the Spanish prime minister, has held off seeking aid until European leaders make aid conditions clear.
Spain needs to know how much the ECB intends to spend buying its debt to decide if it should seek outside help, deputy prime minister Soraya Saenz de Santamaria said yesterday.
“Without reforms and conditionality, the interventions would not be effective and would not be credible,” Mr Draghi said. “Our measures can only be successful if they are accompanied by reforms from countries.”
Mr Draghi said governments are making progress on reducing budget deficits and improving competitiveness. The 17-nation euro economy should return to growth next year, he said.
“My firm belief and central message to you today is, provided policymakers adhere to reforms, we have a number of reasons to be positive about where we are heading. Progress is being made on all fronts to strengthen the foundation of the euro area.
“The current improvement in sentiment doesn’t mean that everything is solved.”