ECB head defends euro strategy in German parliament


European Central Bank President Mario Draghi was to defend his euro-crisis strategy in the German parliament on Wednesday after his plan to buy bonds of struggling nations came under fire in Germany, Europe’s top economy.
Draghi was scheduled to address members of the Bundestag lower house of parliament behind closed doors from 1.45 pm local time (1145 GMT) and then brief reporters at 1400 GMT on what has been dubbed an “information visit.”
While Draghi makes regular visits to the European Parliament, he rarely if ever speaks to national lawmakers and faces a two-hour grilling from German MPs sceptical about his plans to save the embattled single currency.
“The ECB’s bond-buying programme can be viewed critically, the concerns must be taken seriously,” said Steffen Kampeter, a senior parliamentarian from Chancellor Angela Merkel’s conservative CDU party.
“From the federal government’s point of view, it is important that the ECB acts within its mandate to fight inflation,” Kampeter told German radio.
The ECB’s bond-buying plan, announced in August and fleshed out in September, is widely credited as providing a turning point in the three-year eurozone debt crisis but was attacked by many in Germany.
Draghi announced the bank would buy unlimited amounts of the bonds of countries with high borrowing costs but only if they first applied for a bailout from the EU and accepted tough reforms in return.
However, in an unprecedented move, the head of Germany’s powerful central bank, Jens Weidmann, expressed his displeasure in a written statement distancing himself from the programme.
Weidmann fears that intervening on the bond markets to lower borrowing costs of the likes of Spain and Italy is tantamount to monetary financing — printing money to aid governments — which is expressly forbidden by the ECB treaties.
He also said that such actions would reduce the incentives for debt-wracked countries to make the reforms and cut necessary to regain the confidence of the markets.
Others, notably the country’s top economic institutes, have also raised the fear that the programme would stoke inflation, which is especially sensitive in Germany given its experience with hyperinflation leading up to World War II.