‘Just be patient’: European Central Bank President Mario Draghi responds to German critics

Mario Draghi has been subject to verbal attacks from German politicians over the ECB’s stimulatory monetary policies

Mario Draghi at the ECB’s headquarters in Frankfurt yesterday (Reuters)

The President of the European Central Bank (ECB), Mario Draghi, has instructed angry German savers to “just be patient” with the central bank’s low interest rates and large-scale money printing.

The ECB has pushed its policy interest rates into negative territory in order to push inflation in the single currency area back to its 2 per cent target and is also engaged in an €80bn per month asset purchase prorgamme.

But this policy has provoked widespread discontent among eurozone savers – particularly in Germany – due to the knock-on impact for the returns on their current account balances, which have fallen virtually zero.

Mr Draghi has also been subject to verbal attacks from German politicians over the ECB’s stimulatory policies.

But in his regular press conference on Thursday Mr Draghi pushed back strongly against the charge that the ECB has penalised savers.

“Low rates are necessary now to get higher rates in the future,” he said, explaining that the ECB would be able to put up rates to more normal levels when the economy had recovered sufficiently.

“It is in the interests of everyone including Germany. German savers have benefited – like all the other citizens of the eurozone. As the recovery firms up real rates will go up. Just be patient – as the recovery firms up real rates will go up as well.”

He said stimulatory policies by the ECB had already benefited “savers, borrowers, entrepreneurs, [the] workforce” across Europe.

The ECB had earlier voted to keep its interest rates on hold, with the main refinancing rate maintained at 0 per cent and the deposit rate on the money private banks park at the ECB held at minus 0.4 per cent.

The ECB also reiterated its intention to buy €780bn of eurozone bonds this year as part of its money printing programme to stimulate GDP growth and inflation.

At its last meeting in 2016 the ECB announced it would scale back its €80bn a month money printing programme after March to €60bn a month for the rest of 2017.

But the ECB says the programme could be extended into 2018 if necessary.

According to Eurostat eurozone inflation jumped from 0.6 per cent in November to 1.1 per cent in December.

But Mr Draghi said this was largely owing to “base effects” in energy prices and added: “There are no signs yet of a convincing upward trend in underlying inflation.”

These dovish remarks helped send the euro down to $1.0599, 0.3 per cent lower on the day.

Euro down on Draghi press conference

Reuters Eikon

There is a growing divergence in inflation rates across the eurozone.

Inflation in Germany is 1.7 per cent but only 0.5 per cent in Italy, potentially raising a problem for the ECB, which has only a single pan-eurozone target.

Yet in the press conference Mr Draghi predicted this would not continue.

“How likely is it going to be that these divergences will be unmanageable? We judge it not so likely,” he said.