FRANKFURT (Reuters) – European Central Bank President Christine Lagarde on Monday defended the aggressive stimulus measures taken by the ECB in response to the coronavirus pandemic, saying they are proportionate to the risk faced by the euro zone.
Lagarde was facing criticism from conservative lawmakers from the Netherlands and Germany at a hearing in the European Parliament, with one comparing her to the ill-fated French queen Marie Antoinette.
The ECB’s massive purchases of government bonds have already come under fire from Germany’s Constitutional Court, which has given it three months to justify them or lose the German Bundesbank as the main buyer in its flagship debt-buying scheme.
Lagarde emphasised that the ECB took into account “proportionality” when making decisions and carried out a “cost-benefit analysis” — two keywords from the German verdict.
“Our crisis-related measures are temporary, targeted and proportionate … to the severe risks to our mandate that we are facing,” Lagarde told EU lawmakers.
She said the ECB would assist the Bundesbank in addressing the court’s concerns.
But Derk Jan Eppink, elected in the Netherlands for the European Conservatives and Reformists Group, said the ECB’s massive debt purchases served the purpose of keeping southern countries afloat.
He peppered his remarks with references to Charles Dickens’ novel David Copperfield, where a character ends up in prison after running up too much debt, and to Marie Antoinette, who was nicknamed ‘Madame Déficit’ and guillotined during the French Revolution after a life of opulence and excess.
“Had Charles Dickens lived today, he probably would describe you as ‘la Marie Antoinette de la dette’ (the Marie Antoinette of debt),” he said.
The ECB expanded its Pandemic Emergency Purchase Programme (PEPP) to 1.35 trillion euros ($1.53 trillion ) last week and extended it at least until June 2021.
While the German court ruling refers to a different ECB bond-purchase scheme, Markus Kerber, one of the co-plaintiffs in the case, told Reuters on Friday that PEPP may fall foul of a ban on bankrolling governments.
Lagarde said in her testimony the ECB’s policy would “make sure that higher borrowing needs by fiscal authorities … (will) not translate into materially higher interest rates for the private sector”.
The ECB gobbled up all of Italy’s new debt in April and May but merely managed to keep the country’s borrowing costs steady, data showed on Tuesday. Italy, already highly indebted, is among the countries worst-hit by the coronavirus.
(Reporting by Francesco Canepa and Balazs Koranyi; Editing by Hugh Lawson, Catherine Evans and Kevin Liffey)