Mario Draghi takes on his German critics

THE sniping between the European Central Bank (ECB) and German politicians really began in March, when the ECB unveiled a series of unconventional monetary policies designed to lift inflation closer to its 2% target. But even though the ECB unveiled no new expansionary measures at its meeting on April 21st, the shoot-out has intensified.

In March Mario Draghi, the president of the ECB, let off a monetary-policy bazooka. He pulled interest rates deeper into negative territory, announced an expansion of the ECB’s asset-purchase programme and unveiled a new scheme that would pay banks to lend. He even gave a shout-out to helicopter money—the printing of cash to be handed out either to governments or to ordinary citizens—as a “very interesting concept”.

All this put Mr Draghi under fire himself, from German politicians resentful of his loosey-goosey policies. Wolfgang Schäuble, Germany’s finance minister, even suggested that ultra-low rates were partly responsible for the rise of the xenophobic Alternative for Germany party.

At the press conference after the ECB’s latest meeting, Mr Draghi returned fire. Not against deflation: he announced no new measures, though the ECB did publish further details of its plans to start buying corporate bonds with newly printed money. Instead, he told off his critics for their impatience, and denied rumours of a European helicopter cash drop.

The politicians’ complaints seem to have backfired, provoking indignation on the ECB’s governing council. Mr Draghi proudly reported that his colleagues had unanimously endorsed not only current monetary policies but also the importance of preserving the central bank’s independence. “We obey the law, not politicians,” Mr Draghi asserted. The German economy may not need monetary stimulus as much as weaker peripheral countries. But Mr Draghi remarked that the ECB’s mandate is to pursue price stability for the whole of the euro zone, not just Germany.

Worse, Mr Dragi continued, any criticism was counterproductive. By undermining the ECB’s credibility, critics might make its policies less effective. In the end, that would lead to more stimulus—the opposite of what Mr Schäuble wants. Mr Draghi said he welcomed a “polite, lively debate”, but showed no sign of shifting his position.

When asked to clarify his earlier comments about helicopter money, Mr Draghi pulled out a transcript of his comments from March’s press conference and gently chided journalists for making a fuss over nothing. Academic economists may be discussing such measures, he said, but the subject had not seeped into the governing council’s debates. He reminded the audience that the idea was fraught with legal and institutional difficulties (our Free Exchange column this week points out another problem: that governments have to play along), before concluding, “The bottom line is that we have never discussed it.”

Mr Draghi seemed confident that a helicopter drop was not necessary, even though inflation in the euro area in March was a disappointing 0%. He insisted that the easing announced so far would be effective, in time. Of course, he noted, results might come faster if governments got their act together and enacted structural reforms. Right back at you, Mr Schäuble.