The European Central Bank left key interest rates at zero or below on Thursday. But ECB President Mario Draghi said afterwards that the eurozone's top monetary authority can deploy more stimulus if global troubles threaten to derail a modest economic recovery.
Thursday's ECB action comes just a month after Draghi extended a massive quantitative easing programme and dropped interest rates to a record low. Draghi’s continued willingness to do what “whatever it takes” is raising alarm particularly among German politicians.
Critics accuse this man of undermining the independence of the Eurozone’s Central Bank. But German finance minister Wolfgang Schaeuble believes it’s his turf that risks being infringed upon – by the ECB.
“The more we are able to reform our structures, the more growth we create, the more we can defend the ECB from being over-strained," he said.
"In general, a permanent zero interest rate – or negative interest rate – is not a a reasonable situation. There’s no question about it: that is not the function of interest rates.”
Last month, ECB boss Mario Draghi, saw things rather differently. Amongst other measures, he dropped interest rates to a record low – and said they’d have to stay there for an extended period.
The aim was to get money flowing into the still-struggling real economy – by encouraging banks to lend. What that doesn’t guarantee – is that consumers, or companies, will actually borrow.
“They would buy more shares, they would invest in the real estate sector – given that no firms are available who would demand additional credit," said Christian Dreger, German Institute of Economic Research.
"So banks have to move to more risky assets. So there is of course increasing risk that the development in the asset markets is more driven by speculative motives.”
At this sensitive moment for the bloc’s shaky economic recovery – German politicians, and Europe’s bankers, are again on a collision course.
The ECB is by no means the only central bank engaged in what is essentially a massive economic experiment – and no one quite knows what the end result will be. So while Mario Draghi still believes he’s offering vital life support to the global economy. Others, this man included, are increasingly unsure.
