In a surprise move, European Central Bank President Mario Draghi has opened himself up to making an unusual appearance -- defending his controversial monetary policies to the German parliament, the Bundestag.
"If the Bundestag were to invite me, I would gladly come," Draghi told German daily Süddeutsche Zeitung on Friday. "It would be a good opportunity to clarify what we are doing."
According to opinion polls, nearly half of Germans mistrust the ECB leader, a reality that hinders his work, Draghi told the paper. "I must do more to explain our measures," he added.
Draghi has encountered resistance from the Bundesbank, Germany's central bank, but also from leading politicians in the country, some of whom have criticized his recent decision to purchase sovereign bonds in unlimited quantities from crisis-plagued euro-zone countries to reduce yields. Critics argue that the purchases amount to state financing, which the ECB is prohibited from doing.
In the interview with the Süddeutsche Zeitung, Draghi reiterated his position that the bonds would only be purchased in exchange for strict conditions. "Not acting would be much riskier," he warned. Otherwise, he said, the struggling euro-zone countries would be caught in a vicious cycle of mounting borrowing costs from which even good economic policies could no longer save them.
"The financial markets must understand that the euro is irreversible," Draghi said, adding that his bond-buying program has already shown positive results, with trust in the common currency growing around the world. "Fund managers are bringing their money back to Europe," he said.
Indeed, Spanish 10-year bond yields dropped to 5.62 percent on Thursday, down from their July 24 level of 7.64 percent -- well over the 7 percent limit that economists say is unsustainable in the long term. Meanwhile, Italian bond yields were down to 5.03 percent from 6.6 percent on July 24.
Response to Criticism
In response to critical comments from Bundesbank President Jens Weidmann that the ECB is engaging in a questionable means of government financing, Draghi said: "It would be nice if we could always work together with the Bundesbank, but currently we have different views about how the crisis should be overcome." The reason for German opposition to his policies is the country's deep-seated fear of inflation, Draghi pointed out.
The ECB president also rejected accusations that the central bank is financing budgetary deficits. "What we are doing is monetary policy. There is a fundamental difference between buying bonds directly from countries on the primary market or on the secondary market, where the money goes to the bond buyers and not the country." While the ECB is not allowed to do the former, the current course of action is covered by regulations, Draghi said.
In further reaction to Draghi's policies on Friday, European Parliament President Martin Schulz renewed his support for the ECB. Both the planned bond-buying measures and Wednesday's ruling by Germany's Constitutional Court, which gave the green light to the European Stability Mechanism, are capable of ending interest-rate speculation and increasing investor trust in the euro, he told broadcaster ZDF. "That is why what Draghi is doing is absolutely right in my opinion," he said.
In the Süddeutsche Zeitung interview, Draghi also defended himself against an attack by German conservative politician Alexander Dobrindt, who called him a "money forger" for his policies.
"I think Dobrindt will change his mind when he sees the results," Draghi said.