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The European Central Bank just received a hint that traditional German views on monetary policy will continue to feature prominently in its internal debate.
Isabel Schnabel, the country’s nominee for a seat on the ECB’s Executive Board, said at her confirmation hearing in Brussels that she would probably have opposed restarting quantitative easing had she been a policy maker in September. That decision was one of the most contentious taken under former President Mario Draghi, with opposition from officials covering more than half the euro-area economy.
Bundesbank President Jens Weidmann spoke out against it, and his compatriot Sabine Lautenschlaeger resigned from the Executive Board shortly afterward, opening up the spot that Schnabel is set to take.
An economics professor at the University of Bonn, Schnabel argued that the ECB had to act in light of a deteriorating inflation outlook and a slowdown of the global economy. But she suggested that the package, which also included a cut in interest rates further below zero and more favorable terms for long-term loans, might have gone too far.
“The Governing Council agreed -- and I would have agreed as well -- that a very accommodative stance was needed,” she told members of the parliament’s Committee on Economic and Monetary Affairs. But “I probably would have waited with the asset purchases.”
The comments are an interesting twist in her application to become one of the region’s monetary guardians. She has spent the past weeks defending the ECB’s policies in public, and in an animated session in parliament she fretted that the narrative in her homeland is getting out of control, something she’ll try to rectify.
“The discussion in Germany is worrying me a lot because it has become quite aggressive,” she said. “This scapegoating is extremely dangerous -- it may damage the trust in the euro.”
Some German media have lambasted the central bank for its ultra-low interest rates and some politicians, acutely aware of the nation’s cultural bent toward saving, have weighed in. Schnabel said criticism is fine, but it must be accurate.
“We need this discussion in the public, but we shouldn’t criticize the ECB on issues which aren’t true,” she said. “The narrative that the ECB is expropriating the German saver is clearly wrong.”
She added it’s not part of the ECB’s mandate to guarantee people earn interest on their savings, even though she’s aware that negative rates are a “very, very big issue” politically. She suggested that policy makers need to do a better job of explaining the institution’s role, saying communication has been too technical and the explanatory videos on its website are “far too complicated.”
On another politically sensitive issue, climate change, she acknowledged that global warming is “the single biggest issue we’re facing,” but that doesn’t mean it the ECB should take the lead.
“Monetary policy is limited, it cannot do everything,” she said. “One has to stress that the ECB will not be the institution that will deal with climate change.”
--With assistance from Piotr Skolimowski.
To contact the reporters on this story: Jana Randow in Frankfurt at email@example.com;Alexander Weber in Brussels at firstname.lastname@example.org
To contact the editors responsible for this story: Fergal O'Brien at email@example.com, Paul Gordon, Brian Swint
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