Draghi defends ECB as Merkel enters low-rates debate

Thu Apr 21, 2016 1:46pm EDT
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By Balazs Koranyi and John O'Donnell

FRANKFURT (Reuters) - The head of the ECB robustly defended its cheap money policy on Thursday against sharp criticism from Germany, as the country's leader entered a debate that has driven a wedge between the euro zone's central bank and its biggest economy.

Mario Draghi said the ECB's policy of printing money and keeping borrowing costs at rock bottom was working, adding that interest rates would stay at current record lows for a long time.

Emphasizing the bank's right to independence from political interference, Draghi also called on euro zone governments to help get the region's sluggish economy on a more solid footing through economic reforms.

Speaking to reporters after the bank's governing council held key rates, he said harsh criticism in Germany undermined the ECB and its attempts to buoy the economy, playing down complaints that low rates were squeezing savers.

"We obey the law, not politicians," Draghi said, underscoring his commitment to the ECB's primary task of keeping inflation ticking steadily up.

Criticism by politicians in Germany has escalated amid fears that the ECB could even start to hand out free or 'helicopter money' to citizens.

No sooner had Draghi spoken, German chancellor Angela Merkel took the unusual step of describing the debate about the ECB's low interest rates as legitimate.

"That there are people in Germany who discuss the fact that interest rates have been much higher is legitimate," she said, in an acknowledgement that savers' concerns were genuine.   Continued...

European Central Bank (ECB) President Mario Draghi speaks during a news conference at the ECB headquarters in Frankfurt, Germany, April 21, 2016.   REUTERS/Ralph Orlowski