Top ECB Officials Push Back Against Stimulus Criticism

Pushing back against critics who argue he has backed too much stimulus, European Central Bank ^[1] head Mario Draghi ^[2] says the top monetary authority for the eurozone will do "whatever is needed" to lift dangerously low inflation.

Draghi's remark Thursday underlines the bank's willingness to step up its stimulus efforts — even tho ugh they were increased as recently as its last meeting on March 10.

His speech indicated a readiness to rebut criticism from some media and politicians in Germany ^[3], the eurozone's biggest member, who say the ECB's stimulus is excessive, hurts savers and risks destabilizing the financial system.

Draghi coupled that statement with a call for national governments to take steps to make their economies grow faster, producing more demand for goods and services and raising inflation and employment.

He said in a speech prepared for delivery in Lisbon that "the ECB has and will continue to do whatever is needed to comply with its mandat e." Its mission is to get inflation, which is minus 0.1 percent, to just under 2 percent.

"We have solid evidence that the monetary policy measures that we have taken since mid-2014 are being effective in delivering their intended impact," he said. He cited figures showing that borrowing costs have fallen steeply for both businesses and consumers.

A group of German legislators from Chancellor Angela Merkel's conservatives have criticized the ECB for, in their view, doing too much, according to local news reports. The stimulus programs have lowered returns for savers and pension programs, among other things. Finance Minister Wolfgang Schaeuble was quoted Tuesday as saying ECB policy was "less favorable" for Germany. And Jens Weidmann, one of two Germans on the ECB governing council, has said the latest stimulus "went to far."

The ECB on March 10 increased the monthly amount of its bond purchases, a form of stimulus that pumps new money into the banking system. It also cut its benchmark for short-term bank borrowing to zero, and made banks pay more for depositing money at the central bank. That encourages the banks to lend the money instead.

ECB executive council member Benoit Coeure also bridled at criticism, saying Thursday that "we have to act" to bring inflation back up.

At a conference in Frankfurt, Germany, Coeure stressed the central bank's independence from government pressures and said that "this is a country where our independence should be upheld." The ECB is modeled on the fiercely independent Bundesbank, Europe's dominant central bank before the introduction of the euro in 1999.

Draghi was in Portugal to attend the country's council of state, an unusual appearance for a non-member. The setting appeared chosen to underline parts of his message.

Portug al's center-left Socialist government, which took power at the end of last year, is scrapping some austerity measures adopted after the country's bailout in 2011. It says it wants to focus on pro-growth policies.

Draghi has urged countries that are in good financial shape to boost growth by investing in infrastructure, research and education. Schaeuble, by contrast, has submitted government budgets that are in surplus rather than borrow and spend more.

Draghi appeared to downplay Portugal's breaking of the EU deficit limit of 3.0 percent of gross domestic product, but warned that the new government must not roll back reforms. The European Union's executive Commission says Portugal's deficit last year was 4.2 percent and predicts it will fall to 3.4 percent this year but reach 3.5 percent in 2017.

Draghi welcomed the fact that Portugal had drawn up new measures it could take to bring its deficit wi thin the EU limits.

"There is, however, scope for all countries to step up the efforts to make the composition of their tax structure and spending more growth-friendly and, among other things, to redirect public spending towards investment, research and education."

But he warned, in the presence of Prime Minister Antonio Costa, that "there is no case for unraveling past reforms.