The ECB is becoming increasingly concerned about the popular backlash from Germany against its loose monetary policy.
Last week, two German members of the ECB’s 23-member governing council led a six-man revolt against Thursday’s move to cut the bank’s benchmark lending rate by 25 basis points. Among those who voted with the two Germans on Thursday were the heads of the Dutch and Austrian central banks. One senior official said at least a quarter of the governing council is splitting from Mario Draghi, ECB president, on many major policy initiatives.
Officials said the bank’s leadership was even more concerned that growing anti-ECB sentiment in Germany could hamper Mr Draghi’s ability to move aggressively against signs of deflation and on other issues sensitive to Berlin. These include the future of the EU’s “Banking Union” and the provision of new cheap long-term loans to struggling eurozone banks.
“This indeed can be a problem for the coming difficult decisions", said one person involved in the discussions. “It shows a big problem: that the ECB is heavily losing trust and confidence in the largest country of the euro area, namely Germany.”
Another person who has spoken with board members said the increasing anti-Italian bent of some ECB criticism in Germany was of particular concern. Mr Draghi is a former head of the Bank of Italy and the country is projected to end the year with the deepest recession of any of the five largest eurozone economies.
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