German ECB Critics Condemn Draghi Rate Cut as Pandering to SouthBrian Parkin and Patrick Donahue
A senior member of German Chancellor Angela Merkel’s coalition joined banks and insurers in denouncing the European Central Bank’s record-low interest rates, saying the decision distracts from economic reforms.
While Merkel said the ECB is independent and she “will deal with” the decision, critics of ECB President Mario Draghi said he is pandering to weaker euro-region economies while expropriating German savers.
“If Mr. Draghi thinks he has to undertake selective economic policy for certain parts of the euro area, that is simply not his responsibility,” Ralph Brinkhaus, the finance spokesman in parliament for Merkel’s Christian Democrats, said in an e-mailed statement. “The ECB has to watch out that it doesn’t exceed the limits of its mandate.”
Draghi’s decision, which cut the deposit rate to minus 0.1 percent in an unprecedented bid to get credit flowing, reopened a rift between Merkel and German economists and lawmakers who chafe at ECB measures to save or aid the euro region.
“This is the desperate attempt to divert capital flows to southern Europe with ever-cheaper money and punishing interest rates on deposits in order to stimulate the economy there,” Hans-Werner Sinn, head of the Ifo economic institute, said in a statement. The effort won’t work unless countries change their economies, he said.
The ECB’s decision will “go down in the history books as ineffective,” the Berlin-based VoeB state banks federation said. The historic low interest rate will undermine efforts of millions of Germans to save for retirement, said the GDV, which represents Allianz SE and Talanx AG.
“The bill is being footed by all of those who are investing money for the long term, the savers and holders of life insurances,” Sinn said.
Alternative for Germany, an anti-euro protest party that won 7 percent of the vote in European elections this month, renewed its call to dismantle the single currency.
Draghi “is exclusively concerned with holding the euro area together at any price” and his policy “amounts to expropriation” of savers, Joachim Starbatty, a University of Tuebingen economist, said in a statement from the party.
Starbatty was among plaintiffs who lost a bid in 2011 to get Germany’s constitutional court to stop German participation in the first bailout for Greece, the country that set off the euro’s debt crisis in 2009.
“And Germans have to pay the bill once again,” he said today.