European Central Bank (ECB) president Mario Draghi defended his stimulus policies to critical lawmakers in Berlin, yesterday, while reaffirming the urgency to step up structural reforms.
“Low interest rates today are necessary for a return to higher interest rates in the future,” Mr. Draghi said in opening remarks to a 90-minute closed-door session in the German parliament.
“In order to reap the full benefits of our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the European level.”
Four years after visiting the Bundestag at the height of the euro crisis, Mr. Draghi went head-to-head with German lawmakers, who are concerned the ECB’s policies are hurting savers, weakening banks and fueling the ascent of populism.
The central bank chief has also come under criticism for suggesting that Germany’s budget surplus means it has fiscal leeway to boost demand.
The ECB’s measures since the start of the crisis, which include negative rates and a €1.7 trillion bond-buying programme, have “maintained price stability and countered the threat of a new ‘Great Depression’,” Mr. Draghi said.
“Our measures are working: they are contributing to keeping the recovery on track, thus creating jobs and ensuring a recovery that ultimately also benefits savers and pensioners in Germany and the euro area as a whole.”
German finance minister Wolfgang Schaeuble, the most prominent member of Chancellor Angela Merkel’s government to question ECB policies, has also criticised the impact of low rates and suggested Mr. Draghi shares the blame for the rise of the populist Alternative for Germany party.
Mr. Schaeuble told lawmakers in the lower house, or Bundestag, to push Mr. Draghi to defend the ECB’s policies, Bild newspaper reported last week.
Ms. Merkel and Mr. Draghi are scheduled to meet at the Chancellery in Berlin this morning, according to her official schedule.
In his speech, Mr Draghi renewed his plea to governments to use monetary stimulus as an opportunity to deliver structural reforms.
He cited Mr Schaeuble’s own words to make the case for his policies, saying that ultimately higher rates are dependent on improving the economic prospects of the euro area.
“The ECB does not operate in a vacuum: other economic policies are essential to complement our monetary policy. Without them there will be no strong and sustainable recovery. These other policies are a precondition for interest rates to rise again,” he said.
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