Central Banks

German ECB policy-setter breaks ranks with Draghi over QE


A rare public rift emerged at the core of the European Central Bank on Monday as a key policy-setter said she opposed an extension of money printing, days after the bank's head paved the way for more stimulus.

There have long been differing views on the bank's 25-member Governing Council, which sets interest rates. But Sabine Lautenschlaeger's blunt public opposition is unusual because the German sits on the six-person Executive Board, which is the nucleus of policy-setting and tends to present a united front.

ECB President Mario Draghi outlined on Friday how the bank's scheme of quantitative easing to buy chiefly state bonds was helping the economy and pledged to do more if needed.

European Central Bank president Mario Draghi waits for questions during a news conference at the ECB headquarters in Frankfurt, Germany, September 3, 2015
Ralph Orlowski | Reuters

But on Monday, Lautenschlaeger broke with normal etiquette to publicly criticize this stance, saying that ever looser monetary policy had its limits and that money printing had yet to stabilize sinking price inflation, its formal goal.

"I don't see any reason for further monetary policy measures, especially not for an extension of the (asset) purchase program," she said, ten days ahead of a meeting at which policymakers will set the ECB's course.

"It buys time but does not heal the structural causes of a slack economic recovery... We should give the numerous and massive monetary policy efforts time to take full effect."

Predicting a diminishing impact of future money printing, she added: "The potential use must be carefully weighed against the connected risks and costs."

Lautenschlaeger's remarks, delivered in Munich, will feed into a debate in Germany, the country which forms the backbone of the euro zone but where mistrust of the ECB is high.