Super Mario Enters the Lion's Den

European Central Bank (ECB) President Mario Draghi waits to address the European Parliament's Economic and Monetary Affairs Committee in Brussels, Belgium, June 21, 2016. REUTERS/Francois Lenoir/File Photo
Mario Draghi braved a lion's den of ECB critics on Wednesday - the German Bundestag.
  • Why it matters

    Why it matters

    ECB chief Mario Draghi needs the support of Europe’s largest economy for his policies to be politically sustainable over the long run.

  • Facts


    • ECB chief Mario Draghi answered questions during a close-door session of the German Bundestag’s committee on E.U. affairs.
    • Mr. Draghi said the ECB’s controversial policies had stimulated growth in the European Union, contributing to Germany’s economic boom.
    • Mr. Draghi downplayed German concerns that low interest rates are hurting savers, arguing that returns can still be made by diversifying portfolios.
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The German parliament, the Bundestag, has long been a stronghold of opposition to the controversial policies that the European Central Bank adopted in the wake of the euro-zone debt crisis.

And the concern in Germany has only grown as ECB chief Mario Draghi has doubled down on historically low interest rates and an €80 billion ($89 billion) monthly bond-buying program this year.

Facing a chorus of opposition from Europe’s largest economy, Mr. Draghi sought to defend his policies on the home turf of his staunchest critics on Wednesday.

“Where we face common supranational challenges, and currently there are several such challenges, there is no alternative to acting jointly as Europeans.”

Mario Draghi, ECB Chief

Appearing before the Bundestag’s E.U. affairs committee, Mr. Draghi told German parliamentarians that the ECB’s policies have stimulated growth in the euro zone and contributed to Germany’s boom.

“In Germany, exports are benefiting from the recovery in the euro area, unemployment is at its lowest level since re-unification, people’s take-home pay is increasing noticeably, and venture capital is pouring into Berlin’s Silicon Valley,” Mr. Draghi said.

But many German conservatives simply don’t believe the rosy picture painted by Mr. Draghi reflects reality. The ECB chief was hit with sharp barbs of criticism before his Bundestag hearing.

“With his policy, Draghi has sent a fatal signal for a stability-oriented fiscal policy,” Hans Michelbach of Bavaria’s arch-conservative Christian Social Union told a regional newspaper.

Mr. Michelbach and many of his colleagues among Chancellor Angela Merkel’s center-right Christian Democrats are concerned that the ECB’s policies will backfire over the long run and undermine Germany’s economic boom.

The ECB has held benchmark rates at 0.0 percent and leveled punitive rates of -0.4 percent on overnight deposits. Critics argue that these low rates are eroding Germans’ savings and destabilize the country’s financial institutions, which rely on returns from interest.

“I expect Mr. Draghi to present us with a realistic scenario when we can return to a phase of normal interest rates again,” said Antje Tillmann of the Christian Democrats.

Mr. Draghi, for his part, largely downplayed these concerns in his speech on Wednesday, arguing that savers in Germany can “on average still earn satisfactory rates of return by diversifying their assets, even when interest rates on deposit and savings accounts are very low.”

Referred to by some as “the last European,” Mr. Draghi concluded his remarks by making a plea for European solidarity and a renewed push to deepen integration by building common energy and capital markets across the continent.

“Where we face common supranational challenges, and currently there are several such challenges, there is no alternative to acting jointly as Europeans,” Mr. Draghi said.

Whether or not he can bridge the divide with his critics in Germany, however, remains to be seen.


Frank Drost covers banks and politics for Handelsblatt. To contact the author: drost@handelsblatt.com

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