• SPD head Gabriel says Draghi isn't bad guy, it's governments
  • Don't make the ECB an `ersatz economy ministry,' Gabriel says

German Vice Chancellor Sigmar Gabriel said the European Central Bank has “reached its limit” with stimulus measures, wading into the euro area’s debate over monetary policy with a call for governments to step into the breach with higher spending.

“The ECB is acting as an ersatz economy ministry, but it’s not made for that, because its only instrument is printing money,” Gabriel said in Berlin on Wednesday. “Wherever fiscal investment and growth impulses are lacking among European Union states, the ECB jumps in with liquidity.”

While ECB policy is “very problematic” for Germans who see their savings whittled away by shrinking rates, ECB President Mario Draghi shouldn’t be cast as the “bad guy,” Gabriel said at a news conference. The central bank is merely reacting to a low-interest environment fostered by years of fiscal austerity in Europe, he said.

Two weeks after Finance Minister Wolfgang Schaeuble suggested that Draghi shared the blame for the rise of populist parties, Gabriel joined the fray with an invocation of “small savers” lamenting their shriveling savings accounts. The fault, however, lies with the reliance on austerity policies, he said, in a swipe at German Chancellor Angela Merkel.

Gabriel is chairman of the Social Democratic Party, Merkel’s junior coalition partner. With German national elections scheduled in the fall of next year, the SPD trails Merkel’s Christian Democratic Union by as many as 14 percentage points in national polls.

“It’s the people who are paying the price for the lack of an investment and growth policy in Europe,” Gabriel said.

The Stability and Growth Pact that sets debt and deficit limits for the 19 euro-area countries has built-in flexibility that should be used to boost growth, Gabriel said. Low-rate policies forced upon the ECB by the inaction of governments are a “stimulus program for right-wing populists” in Europe, he said.

“It was always clear that this was merely a way to buy time,” said Gabriel, who also is German economy minister. The central bank’s decision in March “to set the key interest rate at zero percent is a clear signal that this time is ending and the ECB has reached its limit with its options,” he said. “A central bank alone can’t solve the growth crisis.”

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