The ECB must employ “exceptional measures” at times to fulfil its mandate of delivering stable prices, its president Mario Draghi wrote in an opinion piece aimed at calming German angst about the bank’s policy course.
The ECB is drawing up a bond-buying plan to lower borrowing costs facing Spain and Italy, which Mr Draghi is expected to detail after a policy meeting next week.
Germany’s Bundesbank — highly respected by German voters — opposes the plan.
Mr Draghi wrote his article in German weekly Die Zeit after Bundesbank chief Jens Weidmann told Der Spiegel the ECB bond-buying plan verged on the taboo for the bank of outright financing of governments.
Jürgen Stark, a former ECB chief economist, piled on the German resistance in another newspaper interview on Tuesday, saying the ECB’s policy course meant it was being politicised and would ultimately no longer be able to deliver stable prices.
“The ECB will do what is necessary to ensure price stability. It will remain independent. And it will always act within the limits of its mandate,” Mr Draghi wrote. “The ECB is not a political institution.
“Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools.”
He added that the ECB’s monetary policy is not transmitted evenly when financial markets “are fragmented or influenced by irrational fears”.
“We have to fix such blockages to ensure a single monetary policy and therefore price stability for all euro area citizens. This may at times require exceptional measures.”
ECB policymakers are posturing over the shape of the new bond-buying programme ahead of their policy meeting.
ECB executive board member Jörg Asmussen, also a German, sought to assuage Mr Weidmann’s concerns, saying the plan would ensure countries whose bonds the ECB buys do not soft-pedal on reforms.
Mr Draghi will not now attend the annual meeting of central bankers in the US at the end of this week as he gears up for the meeting.
German chancellor Angela Merkel gave her tacit support to Mr Draghi earlier this month and reiterated last weekend that she believed the ECB’s policies were in line with its mandate to ensure stable prices in the bloc.
Mr Weidmann’s predecessor as Bundesbank chief, Axel Weber, quit last year in protest at the ECB’s previous, now dormant bond-buying plan. Mr Stark followed him out of the door. Mr Weidmann has indicated, however, that he has no plans to resign.