AFP, Berlin :
Central bank chiefs of Germany and the Netherlands hit out on Friday at ECB chief Mario Draghi for unleashing a huge stimulus package aimed at propping up the flagging eurozone economy, calling the action unnecessary and disproportionate.
Slamming Draghi for “overshooting the mark”, Bundesbank chief Jens Weidmann told Bild daily that “such a far-reaching package was not necessary”.
ECB governors on Thursday pushed the deposit interest rate further into negative territory and relaunched net purchases of government and corporate debt.
But the deep split among the central bankers burst into the open a day after Thursday’s monetary policy meeting.
Around 10 of the 25 members of the ECB governors were against relaunching the quantitative easing programme of purchasing 20 billion euros ($22 billion) worth of debt monthly from November, sources told AFP. Ahead of the meeting, several eurozone central bankers, including Weidmann, had openly warned against unleashing a new round of stimulus so swiftly.
“This decision to buy more public debt will make it harder for the ECB to exit from this policy. The longer (such policies) last, the more the side effects and financial stability risks of the very expansive monetary policy will grow,” warned the German central banker.
He also noted that at the losing end of the expansionary policy are millions of savers, who will see the value of their holdings dwindle in banks.
Separately, the head of the Dutch central bank, Klaas Knot, issued a statement saying the “broad package of measures… is disproportionate to the present economic conditions, and there are sound reasons to doubt its effectiveness”.
Knot, like Weidmann a hawkish member of the ECB’s governing council, said there was no need for the measures when the “euro area economy is running at full capacity”.
“Neither is there a risk of deflation, nor are there any signs pointing to a euro area-wide recession. The only observation is currently that the inflation outlook lags behind the ECB’s aim,” he said.
The highly unusual open criticism was noted by the analysts, who pointed out that while it was not uncommon for central bankers to give interviews after a monetary policy meeting to air their views, Knot’s decision to issue a full-blown statement was “a clear first”.
Central bank chiefs of Germany and the Netherlands hit out on Friday at ECB chief Mario Draghi for unleashing a huge stimulus package aimed at propping up the flagging eurozone economy, calling the action unnecessary and disproportionate.
Slamming Draghi for “overshooting the mark”, Bundesbank chief Jens Weidmann told Bild daily that “such a far-reaching package was not necessary”.
ECB governors on Thursday pushed the deposit interest rate further into negative territory and relaunched net purchases of government and corporate debt.
But the deep split among the central bankers burst into the open a day after Thursday’s monetary policy meeting.
Around 10 of the 25 members of the ECB governors were against relaunching the quantitative easing programme of purchasing 20 billion euros ($22 billion) worth of debt monthly from November, sources told AFP. Ahead of the meeting, several eurozone central bankers, including Weidmann, had openly warned against unleashing a new round of stimulus so swiftly.
“This decision to buy more public debt will make it harder for the ECB to exit from this policy. The longer (such policies) last, the more the side effects and financial stability risks of the very expansive monetary policy will grow,” warned the German central banker.
He also noted that at the losing end of the expansionary policy are millions of savers, who will see the value of their holdings dwindle in banks.
Separately, the head of the Dutch central bank, Klaas Knot, issued a statement saying the “broad package of measures… is disproportionate to the present economic conditions, and there are sound reasons to doubt its effectiveness”.
Knot, like Weidmann a hawkish member of the ECB’s governing council, said there was no need for the measures when the “euro area economy is running at full capacity”.
“Neither is there a risk of deflation, nor are there any signs pointing to a euro area-wide recession. The only observation is currently that the inflation outlook lags behind the ECB’s aim,” he said.
The highly unusual open criticism was noted by the analysts, who pointed out that while it was not uncommon for central bankers to give interviews after a monetary policy meeting to air their views, Knot’s decision to issue a full-blown statement was “a clear first”.
