A recent apology to Mario Draghi by Germany’s top central banker has highlighted a pressing concern in the eurozone’s largest economy about the European Central Bank: that criticism of its monetary policies is going too far and risks creating a domestic backlash.
Jens Weidmann, the Bundesbank president, said sorry to Mr Draghi after a broadside against the ECB’s stimulus package in September, which was delivered in an interview with Bild, Germany’s best-selling newspaper. Bild portrayed Mr Draghi, who has now ended his term as ECB president, as “Count Draghila”, sucking dry the bank accounts of German savers.
Mr Weidmann, who said in the interview that the ECB was jeopardising financial stability, later told Mr Draghi that he was “unhappy with the editorial placement” of the interview — if not its content — according to a Bundesbank spokesman.
The step to try to make amends shows rising concern in Germany that the level of hostility to the ECB may be counter-productive, slowly eroding the country’s trust in their central bank and doing damage that could be difficult to repair.
Marcel Fratzscher, a former official at the central bank under Mr Draghi who now runs the German Institute for Economic Research in Berlin, said: “Germany is sliding into a dangerous anti-Europe, anti-ECB hysteria, which threatens to damage the ECB‘s credibility, the euro and ultimately all of Europe.”
Mr Weidmann was not alone in criticising the ECB’s latest monetary easing; his peers at the French, Dutch and Austrian central banks also voiced their opposition in an unprecedented outpouring of dissent. But criticism of the central bank is often fiercest in Germany, where it is regularly accused of bailing out profligate southern European countries at the expense of prudent savers in the north.
Some observers draw a parallel with the regular stories in British newspapers attacking Brussels and the EU in the years before the 2016 Brexit referendum.
“My concern is that we have an alienation between Germany and the ECB,” said Jörg Asmussen, the Berlin-based economist and former German deputy minister who was on the ECB board under Mr Draghi and is now an investment banker at Lazard.
Mr Weidmann’s attempt to smooth over the spat offers hope for Christine Lagarde, who inherited the ECB presidency from Mr Draghi last month.
In recent weeks there have also been other signs of a slight rapprochement.
Ms Lagarde made a point of giving her first two speeches in Germany, the first at an event in honour of former finance minister Wolfgang Schäuble in Berlin and the second at a banking conference in Frankfurt where she was applauded for saying her first few lines in German.
Christian Sewing, chief executive of Deutsche Bank, underlined the shift in sentiment by praising her Frankfurt speech as the “most encouraging” one he had heard in Europe for years. This contrasted with Mr Sewing’s warning a few months earlier that the ECB’s rate cut would open deep divisions in society and could “ruin the financial system”.
The new ECB president, who is taking German lessons twice a week, has bought herself some breathing room in the monetary policy debate by promising to launch a strategic review of the ECB’s main objectives and toolkit that is expected to last at least a year.
“There are huge challenges ahead for Ms Lagarde — not just in Germany,” said Katharina Utermöhl, senior economist at German insurer Allianz. “By doing the strategic review she has at least won herself a bit of time to decide what to do.”
Meanwhile Mr Weidmann — once dismissed by Mr Draghi as “Nein zu allem”, or “No to everything” — said last month, “I fully agree with Christine Lagarde,” in support of her push for a strategic review, although he has continued to issue thinly veiled warnings against various policy options.
The arrival of Isabel Schnabel at the ECB’s Frankfurt headquarters should be another step towards warming up the relationship. The economics professor at the University of Bonn was recently chosen by Berlin to join the ECB’s board and will on Tuesday appear before the European Parliament as part of her nomination process.
Ms Schnabel has used Twitter to urge her fellow German economists to “dispel the harmful and wrong narratives about the ECB’s monetary policy floating around in political and media circles”.
While she has not always agreed with the ECB’s ultra-loose monetary policy, Ms Schnabel has vowed to do a better job of explaining its decisions than her predecessor Sabine Lautenschläger, the latest of several German appointees to the central bank who quit before their terms ended.
Together, Ms Lagarde and Ms Schnabel should help to improve Germans’ view of ECB, according to Mr Fratzscher.
“Christine Lagarde will have with Isabel Schnabel a powerful German voice defending and explaining monetary policy in the country,” he said. “Jens Weidmann will no longer have the monopoly on German communication about the ECB.”
The danger for Ms Lagarde is that her honeymoon period proves shortlived, just as it did for Mario Draghi.
Before he started at the ECB in 2011 Bild gave Mr Draghi a spiked Prussian helmet and described him admiringly as “rather German, indeed, a proper Prussian”.
But only a year later, after he started cutting rates, the paper asked for its helmet back.