Jens Weidmann. Picture: AFP/KIM KYUNG-HOON
Jens Weidmann. Picture: AFP/KIM KYUNG-HOON

Berlin — On Friday, the head of Germany’s Bundesbank hit out at European Central Bank (ECB) president Mario Draghi for “overshooting the mark” with his huge stimulus package aimed at propping up the flagging eurozone economy.

“Such a far-reaching package was not necessary,” Jens Weidmann told Bild daily, a day after ECB governors pushed the deposit interest rate further into negative territory and relaunched net purchases of government and corporate debt.

The discontent over Draghi’s highly expansionary move burst into the open after Thursday’s monetary policy meeting, which left eurozone central bankers deeply divided, sources told AFP.

Ahead of the monetary decision meeting, several eurozone central bankers, including Weidmann, had warned against unleashing a new round of stimulus so swiftly.

“This decision to buy more public debt will make it harder for the ECB to exit from this policy. The longer [such policies] last, the more the side-effects and financial stability risks of the very expansive monetary policy will grow,” warned the German central banker.

He also noted that at the losing end of the expansionary policy are millions of savers, who will see the value of their holdings dwindle in banks.

Draghi had pointed to three reasons for the ECB’s heavy hand in September: data and surveys showing the eurozone economy already slowing; looming threats, such as protectionism and Brexit; and downward revisions to the bank’s economic forecasts

But the ECB’s “big bang” blast of measures has touched a nerve, particularly in Europe’s biggest economy — a nation of savers and a fast-ageing society where the government’s mantra has been to keep its budget balanced in preparation for rising pension outlays in the coming decades.

Publishing a doctored photo of Draghi with sharp teeth, Bild daily headlined their story: “That’s how Count Draghila is sucking our accounts dry.”

The outrage also cut across to centre-left media, with the Tagesspiegel broadsheet slamming Draghi’s latest salvo as “horror policy”, warning that it served neither savers and pension funds nor life insurers. Rather, it warned that the cheap money was keeping afloat “zombie firms” that should have gone bust under normal circumstances.

Likewise, Süddeutsche daily said that while Draghi had in his eight years in office saved the eurozone with his bold action, “Thursday’s decisions show that he has now lost his way”.

AFP