Left Menu
Development News Edition

UPDATE 3-ECB hawks rally against Draghi's farewell stimulus

Reuters | Updated: 14-09-2019 00:31 IST | Created: 14-09-2019 00:30 IST
UPDATE 3-ECB hawks rally against Draghi's farewell stimulus
Image Credit: Reuters

Conservative policymakers slammed the European Central Bank's lavish stimulus measures on Friday, voicing doubts about the need and effectiveness of a package that could consume most of the bank's remaining firepower.

Facing a protracted growth slowdown, the ECB cut rates deeper into negative territory on Thursday and relaunched fresh bond purchases with no scheduled end-date, a move that divided the normally collegial Governing Council. Although no vote was taken, sources with direct knowledge of the discussion said that over a third of policymakers opposed the fresh asset buys, pushed by outgoing ECB chief Mario Draghi, an unusually high number for a body that normally strives for consensus.

"This broad package of measures, in particular restarting the asset purchase programme, is disproportionate to the present economic conditions, and there are sound reasons to doubt its effectiveness," Dutch central bank chief Klaas Knot, a frequent critic of the bank's ultra-easy monetary policy, said. While disagreements are frequent, ECB policymakers usually line up behind decisions and refrain from openly criticising its policy.

Bundesbank President Jens Weidmann, another key critic, also said the stimulus was excessive, and Thursday's decisions indicated that rates will stay low for a long time. Germans have been especially irked by negative ECB rates and mass-selling newspaper Bild portrayed Draghi as "Count Draghila", a blood-sucking vampire, who is sucking dry the bank accounts of German savers.

Other dissenters on Thursday included French central bank governor Francois Villeroy de Galhau, ECB board member Benoit Coeure, also a Frenchman, German board member Sabine Lautenschlaeger and Estonian central bank chief Madis Müller, sources told Reuters. While each policymaker gets one vote, the dissenters represented countries that account for more than half of the euro zone's gross domestic product (GDP).

Knot said the euro zone economy is running at full capacity, wages are increasing and that financing conditions are so easy that they do not impede the flow of credit. "There are increasing signs of scarcity of low-risk assets, distorted pricing in financial markets and excessive risk-seeking behaviour in the housing markets," added Knot, a member of the ECB's policy-setting Governing Council.

Austrian central bank chief Robert Holzmann, meanwhile, said he was worried the ECB had made a mistake and that such a broad package should not have come before the bank's planned policy review, which could even see the inflation target of just below 2% lowered. "This (review) is something I had hoped the bank should have been doing before making this decision," Holzmann told Bloomberg TV.

"It may be that 2% (inflation) at the moment is out of reach and 1.5% also signifies stable prices, almost stable prices. So there is no need to ... use all the power you have in order to move up to 2% if the cost is too high," he added.


TRENDING

OPINION / BLOG / INTERVIEW

Post-COVID-19 Nigeria needs a robust Health Management Information System to handle high disease burden

Nigeria is among a few countries that conceptualised a health management information system HMIS in the early 90s but implementation has been a challenge till date. Besides COVID-19, the country has a huge burden of communicable and non-com...

Morocco COVID-19 response: A fragile health system and the deteriorating situation

Learning from its European neighbors, Morocco imposed drastic measures from the initial stages of the COVID-19 outbreak to try to contain its spread. The strategy worked for a few months but the cases have surged after mid-June. In this sit...

COVID-19: Argentina’s health system inefficiencies exaggerate flaws of health information system

You can recover from a drop in the GDP, but you cant recover from death, was the straightforward mindset of Argentinas President Alberto Fernndez and defined the countrys response to COVID-19. The South American nation imposed a strict...

Videos

Latest News

Jaswant Singh passes away; Perez, PM pay tributes

Former Union minister Jaswant Singh, one of the founding members of the BJP and a close associate of ex-prime minister Atal Bihari Vajpayee, died here on Sunday following a long spell of illness. He was 82. President Ram Nath Kovind, Prime ...

'Taiwan is Taiwan': China name dispute moves from birds to climate change

The dispute over international organisations referring to Taiwan as Chinese has moved from wild bird conservation to climate change, after a global alliance of mayors began listing Taiwanese cities as belonging to China on its website. Chin...

HIGHLIGHTS

Following are the top stories at 1 pm NATION DEL5 LD JASWANT Former Union minister Jaswant Singh dies, PM pays tribute New Delhi Former Union minister Jaswant Singh, a close associate of ex-prime minister Atal Bihari Vajpayee,...

Man kills sons after argument with wife

A 32-year-old inebriated man allegedly killed his two children after an argument with his wife in Uttar Pradeshs Mahoba district, police said on Sunday. Harnarayan, a resident of Parapantar village in Panwari block, tied a gamcha around the...

Give Feedback