ECB Plea

Draghi to Germany: Just Be Patient

  • Why it matters

    Why it matters

    The European Central Bank on Thursday decided to keep the euro zone interest rate unchanged, a decision likely to annoy German politicians and consumers who fear the erosion of their savings.

  • Facts


    • The ECB’s governing council on Thursday decided to keep rates unchanged and made no changes to its previously announced €60 billion per month bond-buying program.
    • Germans are waiting for a change in interest rate policy, however, worried about financial stability and consumer unrest.
    • German Finance Minister Schäuble told Bloomberg TV he would have a hard time explaining the ECB’s decision at home.
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European Central Bank President Mario Draghi Announces Interest Rate Decision
Mario Draghi is pretty happy with the ECB's policies, even if Germany isn't. Source: Bloomberg

German economists weren’t really expecting any major new announcements from the European Central Bank on Thursday, but that doesn’t mean they weren’t hoping.

“The euro zone’s pain is easing, and the ECB should really have talked about higher interest rates today,” Joerg Kraemer, chief economist of Germany’s Commerzbank, said in a research note on Thursday.

He’s not alone. With inflation in Germany on the rise, complaints from the more conservative economic quarters in Berlin and Frankfurt have once again been growing louder. Many are demanding the euro-zone’s top central bank ease up on the tens of billions of euros it is pumping into the currency bloc’s economy each month. Or, if it’s not going to change course now, they had at least hoped for a few signals from the ECB about when it might start thinking about winding down its bond-buying program, or even raise interest rates from their current record lows.

“In Berlin, Mario Draghi’s unwavering dovishness will go down about as well as Donald Trump’s hints of tariffs on German cars.”

David Lamb, FEXCO Corporate Payments

Mario Draghi, the head of the Frankfurt-based central bank that sets interest rates in the euro zone, wasn’t about to oblige. At its regular six-weekly meeting on monetary policy on Thursday, the ECB governing council kept interest rates at record lows and said it would continue buying €60 billion per month in government and corporate bonds from April through the end of the year.

“In Berlin, Mario Draghi’s unwavering dovishness will go down about as well as Donald Trump’s hints of tariffs on German cars,” David Lamb, head of dealing at the Irish firm FEXCO Corporate Payments, said in an emailed statement to Handelsblatt Global.

Mr. Draghi in a press conference made clear he had little interest in talking about any ECB plans to wind down his policies. Rather than signalling an end to the central bank’s aggessive strategy, Mr. Draghi even made clear he’s still willing to expand it if the euro zone’s economy should weaken again. The ECB has to watch out for all 19 countries in the bloc – not just its largest economy. From Germany, he pleaded for patience as the rest of the 19-nation euro zone, and particularly southern Europe, is still healing from the massive debt crisis of the past few years.

“The honest answer would be: Just be patient,” he said of the German complaints.

That’s not likely to go down well here in Germany. Finance Minister Wolfgang Schäuble in an interview with Bloomberg Television on Thursday acknowledged he will have “political problems” explaining the ECB’s decisions to the German public. That’s because economists, bankers and savers here fear the ECB’s policies are harming financial stability and eroding the savings of the average consumer.

It’s hardly a new debate. German central bankers have long been more “hawkish” than their counterparts in much of the rest of the euro zone, preferring a less aggressive approach to monetary policy. But with the ECB set to keep its current bond-buying program going until at least the end of 2017, those fissures are only going to grow over the course of this year.


Christopher Cermak is an editor with Handelsblatt Global based in Berlin. To contact the author:

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