European Central Bank
President Mario Draghi suggested Wednesday that German critics
must accept that the ECB has a eurozone-wide mandate to maintain
price stability and cannot favour one country's views.
Draghi signaled to German newspaper Die Zeit that the ECB
is ready to buy government bonds to fight deflation, adding that
to achieve this, "options are not infinite".
His comments were published as a top European court's
advisor said an earlier ECB bond program needed only minor
tinkering in order to fall in line with European Union rules - a
signal in support of future quantitative easing (QE).
In the newspaper interview, Draghi warned that although the
risk of deflation in the eurozone remains low, it is still
higher now than it was one year ago.
The ECB adjusts interest rates to keep inflation at about
2% but it has been well below that for months.
December figures from Eurostat showed the eurozone as a
whole slipped into deflation, falling below 0.2% on an
annualized basis.
Central bankers have been alarmed at how low prices have
fallen in much of Europe, nearing zero at some points, which
indicates how slow demand has become and the risk of deflation.
Meanwhile, an earlier ECB bond-purchase program is
compatible "in principle" with EU law, said European Court of
Justice (ECJ) Advocate-General Pedro Cruz Villalon.
He had reviewed the central bank's Outright Monetary
Transactions (OMT) program ahead of a ruling expected later this
year by the court.
The OMT program was unveiled more than two years ago but
has not yet been used.
Germany opposes QE, which involves buying large
amounts of sovereign bonds, while supporters say this is needed
to increase growth and avoid deflation in the struggling
eurozone.
Villalon said the ECB must have "broad discretion" over the
EU's monetary policy, designed to keep inflation at about 2%.
Germany's courts had previously raised questions about the
legality of the OMT program.
On its Twitter account Wednesday, the ECB said that
Villalon's opinion was an "important milestone".
"OMT is ready and available," tweeted the central bank.
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