Draghi chides Cameron’s call for ECB action

Posted on May 24, 2012

Mario Draghi reproached David Cameron for outspoken demands that the European Central Bank take decisive action to solve the eurozone crisis, according to people who witnessed the exchange at Wednesday’s EU summit.

In comments addressed to all EU leaders attending the dinner, the eurozone’s top central banker directly challenged the British prime minister and warned of the dangers of encroaching on ECB independence.

    To the consternation of some EU leaders, Mr Cameron has publicly declared that the eurozone must “make up or break up” and on arrival at the summit called for “a bank that gets behind that single currency”.

    He spoke even more frankly during the private dinner, making the case for resolute “monetary activism” from the ECB to support flagging growth and calling for a plan to stem contagion should Greece exit the eurozone.

    According to people present, Mr Draghi appeared angered by Mr Cameron’s repeated calls for the ECB to intervene. In the ECB president’s view, this violated the principle of central bankers acting independently and not accepting instructions from politicians.

    Mr Draghi feared the UK prime minister’s intervention would confuse communications and add to financial market nervousness.

    Rather than make a personal attack on the prime minister, Mr Draghi sought to underline the importance of independence to all the gathered leaders. The ECB president did agree with the British prime minister that the eurozone needed a clearer vision of how it would operate over the next few years.

    Downing Street confirmed that Mr Draghi had stressed the ECB’s independence and had explained that the Frankfurt-based central bank – operating on behalf of 17 countries – did not have the same freedom of manoeuvre of the Bank of England.

    Mr Cameron often says that his government’s cost-cutting has “given the space” for the Bank of England to ease monetary policy. But he has never directly called on Sir Mervyn King, the Bank governor, to take action.

    If the eurozone crisis intensifies further, Mr Draghi could have a crucial role in ensuring the stability of Europe’s monetary union.

    He has already faced calls from François Hollande, France’s new president, and Mariano Rajoy, Spain’s prime minister, for the ECB to support eurozone government bond markets. But Mr Cameron apparently went significantly further in criticising directly the ECB’s policy actions.

    While the ECB has bought Spanish, Italian and Greek bonds with the aim of “stabilising financial markets”, it has not gone so far as to launch large scale asset purchase schemes in order to stimulate growth.

    Although ECB presidents like to stress their independence and often tell eurozone governments what they should do, it is rare for arguments to become personal – especially when involving politicians from outside the eurozone.

    Mr Draghi’s reproach will have chimed with some other senior EU figures handling the crisis, who are annoyed over supposedly helpful interventions that create even more alarm.

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