Draghi Stimulus Critic Has No Regret as Rift Shifts to Etiquette

16 Oct 2019, 09:04 PM IST

(Bloomberg) -- Netherlands central bank chief Klaas Knot was unapologetic as he defended his release of a public declaration openly criticizing the European Central Bank’s latest monetary stimulus after its Sept. 12 meeting.

Speaking a day after former ECB Chief Economist Peter Praet called the use of a statement of opposition as “inappropriate,” the Dutch governor hit back by saying that the way a decision is communicated “is an extension of the way in which a decision was made.”

With Praet also calling on his old colleagues to keep their cool, in an interview with Les Echos on Monday, what began as a schism over the health of the economy and how to stimulate it is now also morphing into an argument about central banking etiquette.

Draghi Stimulus Critic Has No Regret as Rift Shifts to Etiquette

Although ECB President Mario Draghi said the ECB’s revival of its bond buying program had the backing of a “significant majority,” it elicited sharp public criticism from rate setters representing some of the region’s largest economies -- including Knot.

“I thought I could do the best by clarifying my position immediately afterward,” he said at a press conference in Amsterdam on Tuesday.

Bridging the Chasm

With Draghi poised to retire from office at the end of this month, the degree to which the debate over quantitative easing has drawn out toward the end of his term shows the chasm that incoming President Christine Lagarde will need to bridge.

After Sabine Lautenschlaeger became the third German official in a row to leave the Executive Board early, a host of former officials joined the fray, including two of Praet’s predecessors, Otmar Issing and Juergen Stark, who published a memorandum criticizing Draghi’s policies.

Knot held out the possibility that he may now hold his counsel on the matter. Having been able to add “some color” when speaking to lawmakers in The Hague recently, he said his stance was clear.

“I no longer feel the need to contribute even more to that,” he said.