ECB Policy Makers Push Back Against Attacks on Draghi’s Stimulus

(Bloomberg) -- European Central Bank policy makers pushed back on Wednesday against criticism of their latest stimulus measures, saying that a big package was essential to boost sluggish inflation and growth.

The ECB’s announcement last week “seeks to counteract the deterioration in growth and inflation forecasts through a package of measures that complement one another by relaxing financial conditions in different ways,” Bank of Spain Governor Pablo Hernandez de Cos said Wednesday in the Spanish city of Valencia. The measures had to be announced simultaneously to have the full impact, he added.

His comments echo those made at a separate event in Madrid by ECB Vice President Luis de Guindos. Both men seized on previously scheduled public speeches on Wednesday to address criticism from their more hawkish central bank colleagues.

Less than 24 hours after ECB President Mario Draghi announced the details of the central bank’s sweeping stimulus package -- which included an interest-rate cut, a re-launch of quantitative easing and a change in forward guidance -- the governors of the German, Dutch and Austrian central banks said they disagreed with the extent of the move. Around eight of the 25-member Governing Council opposed the renewed bond-buying.

Chief Economist Philip Lane and Bank of Greece Governor Yannis Stournaras pushed back against those criticisms on Monday. Hernandez de Cos and Guindos followed suit on Wednesday.

While the two Spaniards were resounding in their defense of the ECB’s looser policy, they also called on euro-area governments to do their part. Both said countries that have the fiscal space -- such as Germany -- should spend more. Those that don’t should focus on structural reforms to boost productivity.

“Monetary policy can’t be the only option,” de Guindos said in Madrid. “If we want to face the economic situation, fiscal policy must play its part to face the deceleration along with monetary policy, and it must be done in a coordinated way, in an institutionally integrated way.”

Policy makers have been increasingly vocal in recent months about the need for a united front against weak growth and slow price gains.

“All of these policies - monetary, fiscal, structural -- can be particularly effective if they are adopted together, seizing on the complementary nature that exists among them,“ Hernandez de Cos said.

©2019 Bloomberg L.P.

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