European Central Bank President Mario Draghi endorsed proposals by German Finance Minister Wolfgang Schaeuble for a commissioner that has power over European Union nations’ budgets.
“I am fully in favor of it,” Draghi said in an interview with Germany’s Der Spiegel, according to a transcript published today by the Frankfurt based-ECB. “Governments would be wise to seriously consider it” as “in order to restore confidence in the euro area, countries need to transfer part of their sovereignty to the European level.”
Finland and the Netherlands backed Germany at an Oct. 18-19 summit of European leaders in a maneuvering that will climax at a Dec. 13-14 meeting to set deadlines — possibly as long as a decade — for a more united economy with more disciplined budget management and central oversight. Draghi also sought to alleviate German concerns about the ECB’s bond-purchasing program by pledging that it would not engage in “uncontrolled” market interventions.
The ECB president has come under fire in Europe’s largest economy for the new plan, the details of which were announced in September, after Spanish and Italian borrowing costs had surged.
“Unlimited does not mean uncontrolled,” Draghi said. “We will only buy bonds from those countries that accept strict conditions, and we will check very carefully whether those conditions are adhered to.”
Choice of Words
Bundesbank President Jens Weidmann has opposed the program, and the German media has been critical too, prompting Draghi to appear in front of the German parliament last week, trying to canvass support by saying buying bonds would not lead to inflation.
Draghi said he “chose the word ‘unlimited’ in order to clearly indicate our determination to defend the euro,” according to the transcript. “Responding to the crisis of confidence, while maintaining price stability, will benefit German taxpayers and savers.”
The announcement of Draghi’s yet-to-be-deployed bond-buying program has calmed financial markets.
The program has Merkel’s blessing, yet 42 percent of respondents to a Stern survey published Sept. 6 said they had little or no trust in the ECB president, compared with just 18 percent who judged him favorably.
“We take the worries of the people very seriously,” Draghi said, adding that German taxpayers are likely to “make a profit” from the ECB’s now mothballed first government bond buying program, the Securities Markets Program.
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