Draghi defends ECB policy in front of critical German lawmakers

European Central Bank chief Mario Draghi defended his ultra-loose monetary policy when he faced some of his staunchest critics in Germany on Wednesday.

The ECB's monetary policy had ensured price stability and helped to head off the threat of a new "Great Depression," Draghi told a closed meeting with the German parliament's powerful budget, finance and European Affairs committees, lawmakers said.

Draghi said the ECB measures had contributed to the eurozone's recovery and created jobs, ultimately resulting in an upswing that both depositors and pensioners in Germany as a whole could benefit from.

"I made the point that the measures had been effective," Draghi told a press conference after meeting the committee members. He is to hold private talks with Chancellor Angela Merkel on Thursday.

Draghi again set out his case for firing up the eurozone economy and heading off the threat of deflation through a 1.7 trillion-euro (1.9-trillion-dollar) bond-buying programme and by cutting the ECB's benchmark interest rate to zero.

Draghi's German critics are sceptical about how successful the ECB's monetary policy has been in spurring the eurozone economy, while they also see record low interest rates as having hit German savers, those on fixed incomes and bank profits.

The ECB chief told lawmakers that what a household forfeited on bank deposits as a result of low interest rates, it might save by lower loan payments for his house.

An increase in interests rates required more investment and structural reforms so as to boost economic growth and productivity, he said.

"I cherish occasion for debate and to listen to people who have different views because it forces us to think about views. But not changing them, of course," he told the press conference when asked about confronting his critics.

However, Draghi would not be drawn at his press conference on the future of Germany's ailing Deutsche Bank.

"The monetary policy of the ECB is not the main reason for the low profitability of banks," Draghi told the committee members.

He said it should not be forgotten that many institutions could be able to compensate for lower interest income with more loans, better debt management and lower interest expenses.

But he said that there were considerable differences between banks.

Some banks had already adapted their business models and may adapt to the current low interest rate environment, he said.

Draghi said he told committee members that the bank would forge ahead with its policies until the inflation rate in the eurozone climbed back up to close to the ECB's annual target.

But at just 0.2 per cent, annual inflation in the eurozone currently remains well short of the ECB's inflation target of nearly 2 per cent.

Economic growth has also turned in a mediocre performance with the ECB expecting the currency bloc to expand by 1.7 per cent this year, before easing back slightly to 1.6 per cent in both 2017 and 2018.

Last update: Wed, 28/09/2016 - 18:21
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