Almost a month after stoking a divisive debate about how far it should go in pumping money into the flagging eurozone economy, the European Central Bank is trying to soothe relations with Germany.
Late last week, German Finance Minister Wolfgang Schaeuble was reported as blaming the ECB’s cheap-money policy in part for the rise of the country’s right-wing anti-immigration Alternative for Germany (AfD).
The discussion will continue when ECB president Mario Draghi meets Schaeuble this week in Washington at the International Monetary Fund’s spring gathering of central bankers and ministers from around the world.
A storm of protest erupted in thrifty Germany after Draghi last month described the idea of “helicopter money” (sending money directly to citizens) as a “very interesting” – if unexamined – concept.
Late last week, top ECB officials, including the ECB’s chief economist and its vice president, backpeddled, saying the idea was not on the table. “The ECB’s policy was already unpopular in Germany and the idea of helicopter money was the straw that broke the camel’s back,” said Joerg Kraemer, an economist with Commerzbank in Frankfurt.
German analysts see the idea as an excessive ramping up of a loose money policy that is already fuelling rising property prices in their country.
On Sunday, a number of German politicians criticised the ECB’s stance as rumours of possible legal action over helicopter money swirled.
Many at the ECB resent what they see as unrelenting criticism from German politicians, journalists and economists, who reject the ever more generous measures the ECB is taking to fire up the slow economy.
There seems little prospect, however, of the debate abating ahead of a meeting of the 19 eurozone central bank governors on April 20-21.
Others forecast that the idea of sending money directly to Europeans could shadow such gatherings.
“The criticism in Germany is justified but a little dishonest,” said Commerzbank’s Kraemer. “There is no way Schaeuble would be balancing his books were it not for the ECB’s policy.”