“The first rule for a governor: if you want to keep your reputation intact you have to react to political attacks.” Speaker, on condition of anonymity, is a central banker who yesterday took part in the meeting of the ECB in Frankfurt. “Draghi had to answer Schaeuble”. The Finanzminister, tell dall’Eurotower, it went further by stating that Mario Draghi with its expansive monetary policy is guilty of the success of populist parties as Alternative Fuer Deutschland. Yet there is something that goes beyond the response to the powerful minister of Berlin. There is a new political configuration that is taking shape in Europe.
In recent years Draghi has already challenged the facts Schaeuble and Weidmann, head of the Bundesbank, by passing the monetary policy moves such as Quantitative easing against the German mark. But now the attack is verbal, in a more visible way. The number one of the ECB has used calibrated words, recalled that the Central Bank is independent, it does not respond to policy but to the law.
An area to which the German public is sensitive, as shown by Sigmar Gabriel, deputy Social Democrat chancellor who has defended Dragons by Schaeuble attacks by opening an internal debate in Germany which made it easier to answer the former Bank of Italy governor. And the same Weidmann in recent days could not help but to defend the independence of the ECB.
Just the role of Weidmann could change the balance in Frankfurt. For some time the German banker fell on softer positions, reinforcing Dragons. If official sources ECB suggest a rethinking of the “hawk” who understood how the President of the Italian policy is needed as economy and inflation do not share as incorrectly predicted by the Germans, more than one central banker has a different interpretation: “Jens is softening is preparing the candidacy for the leadership of the ECB after Draghi,
in 2019. “but even outside the central Bank balances are changing, favoring not only the Dragons, but also the leaders who want to change the European economic policy. Taking into account that Merkel is not always in line with Schaeuble, his political opponent within the CDU, Germany today while remaining hegemonic power in Europe is a bit ‘more isolated than before. At the table of the European Council Chancellor has lost allies ever, starting with those who were once its armed wing: Finland, in economic crisis, and the Netherlands, in the midst of a political crisis. Sweden’s Stefan Loeffen went to the center, Spain’s Rajoy output from the era as well as Portugal Antonio Costa has slipped from the front penalty taker. Then there is the relationship with Eastern Europe, deteriorated by clashes on migrants, particularly with Poland back in the hands of a Kaczynski. And the French weakness that weakens strength of Franco-German axis shock does not help.
The Merkel remains the true leader of the continent, as evidenced by its ability to impose on others the pact on EU-Turkey migrants, but its strength is in part diminished. The open fronts are many, but with the ECB, and the Italian Government, at the time the battleground is constituted by the request for Schaeuble to limit government bonds in the belly to the banks (for Italy would be a catastrophe). Proposal which moreover is used to lock the completion Banking Union with common guarantee on deposits held rather important by other governments and by the Dragons to strengthen the eurozone.
That’s why the words of Draghi, never so explicit. On the one hand it wants to prevent the long German election campaign (in Berlin you vote in 2017) interfere with the work of the ECB; the other prepares the way for potential new measures to boost growth and fight deflation, as the ammunition fired in January seem to have no impact as hoped.
On the other hand Draghi yesterday used balanced words , after sticking Schaeuble closed all’helicopter money unpopular with Germany. And Merkel has in turn defined legitimate debate on monetary policy, but defended the independence of the ECB pulling ears to his Finanzminister. And finally he made the point: “The low interest rates should be used by politicians to do their homework.” This is the mother of all tension: too long Draghi is acting as the alternate policy in prop up the euro and no one knows what will go on to do so. And the Chancellor, in his pragmatism, he reminded everyone.
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