Dermott Jewell — policy adviser at the Consumers’ Association of Ireland — told the Irish Examiner it was unacceptable that while the ECB set rock-bottom rates to stimulate the eurozone economy that the costs of Irish loans were substantially higher than anywhere else.
The call came on the day that ECB president Mario Draghi stoutly defended the independence of his central bank against attacks from German politicians, who have claimed the ECB’s policy of ultra-low interest rates is hurting savers and pensioners in Germany.
Mr Draghi, having yesterday kept its key rate at 0%, should ensure that banks apply low rates across all eurozone members, Mr Jewell said.
Mr Jewell said Irish banks are offering ultra-low deposit rates, but charging households and companies much higher rates to borrow money.
There are “enough” Irish MEPs to mount a campaign through the European Parliament, the only forum that can question the ECB directly, Mr Jewell said.
The Irish Examiner has long highlighted the huge discrepancy between the high-interest rates facing Irish companies compared with almost anywhere else in the eurozone.
Eurozone-wide lending surveys by the ECB and the Central Bank of Ireland consistently show the costs of borrowing for Irish companies are among the highest in the eurozone, in particular for Irish SMEs.
Alan McQuaid, chief economist at Merrion Capital, said the ECB’s monetary transmission mechanism was working in Ireland as far as deposits were concerned, as banks offered rock-bottom rates for savers, but not working on the cost of loans because the “rates are much higher than elsewhere”.
Mr McQuaid believes the discrepancy between the costs of loans here and the rest of the eurozone will become an increasingly “serious issue” for the ECB.
“If you are in a monetary union you should be able to avail of the same rates,” Mr McQuaid said.
Mr Draghi also announced yesterday that it was keeping its deposit rate at -0.4%.
The ECB aims to meet its mandate to get inflation across the eurozone as close as possible to 2%, but with economic growth remaining tepid in Europe there is little hope that the ECB will hit that target anytime soon.
He defended the ECB’s governing council against attacks on its policy of monetary stimulus, suggesting that politicians by sowing uncertainty were ensuring that its €80 billion-a-month bond-buying programme would take longer to work.
Analysts said that politicians have been deflecting from political tensions over migrants and refugees and the rise of the right-wing Alternative for Germany party by attacking ECB policies.
Mr Draghi told journalists in Frankfurt that low-interest rates were not hurting most bank’s earnings across the eurozone. And the overall effect of its quantitative easing policy “has been positive”, he said.
Mr Draghi noted the volatility in the currency markets in the run up to the British referendum on the EU on June 23.
Sterling yesterday was at 78.80 pence against the euro, halting a four-day advance.