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Draghi Defends ECB Stimulus With Veiled Criticism of Opponents

Piotr Skolimowski and Alexander Weber
Draghi Defends ECB Stimulus With Veiled Criticism of Opponents

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European Central Bank President Mario Draghi warned that a spate of public dissent by policy makers over the institution’s latest monetary stimulus could be damaging for the euro-area economy.

Less than a day after the ECB’s Sept. 12 decision, members of the Governing Council were out in force to set out their views over the relaunch of quantitative easing. Dutch central bank chief Klaas Knot and Germany’s Jens Weidmann said it was a step too far, while others, such as Finland’s Olli Rehn, spoke in favor.

Speaking to European Parliament lawmakers on Monday, Draghi said policy disagreements are “pretty common,” noting the split vote at the Federal Reserve over its interest-rate cut last week. But he added there’s a risk that some criticism can weaken the impact of stimulus.

“The form in which this dissent is made known is very important,” he said. “It’s very important especially in a situation where we have a multi-country currency union. This communication ought to be carefully drawn in order not to undermine the effectiveness of our decisions. That’s very, very important.”

Draghi said he couldn’t recall saying anything dissenting while he was on the ECB’s Governing Council as governor of the Bank of Italy. That period included two controversial rate hikes in 2011 under his predecessor Jean-Claude Trichet, which Draghi didn’t oppose, but which he reversed shortly after becoming president late that year.

The ECB chief, whose term finishes at the end of October, earlier defended the latest stimulus, describing it as “essential.”

Reports earlier on Monday showed the economy deteriorating, with Germany in its worst industrial slump since the global financial crisis. Across the euro zone, there are signs that the manufacturing recession is starting to spread to services as the labor market comes under pressure.

“Recent data and forward-looking indicators -- such as new export orders in manufacturing -- do not show convincing signs of a rebound in growth in the near future and the balance of risks to the growth outlook remains tilted to the downside,” Draghi said.

Given that backdrop, he once again called again on governments to provide a more decisive contribution with fiscal policy.

“We need a coherent economic strategy in the euro area that complements and enhances the effectiveness of monetary policy,” Draghi said.

(Updates with Draghi in fifth paragraph, Knot in 10th.)

--With assistance from Fergal O'Brien, Yuko Takeo, Lucy Meakin, Joost Akkermans and Zoe Schneeweiss.

To contact the reporters on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net;Alexander Weber in Brussels at aweber45@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Fergal O'Brien

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