Malta’s Cen­tral Bank Gover­nor re­bukes Ger­man Fi­nance Min­is­ter Schauble

Malta Independent - - FRONT PAGE -

Malta’s new cen­tral bank gover­nor has re­jected claims that Euro­pean Cen­tral Bank pol­icy has fu­elled pop­ulism, say­ing that Europe’s economies are health­ier and less sus­cep­ti­ble to ex­treme pol­i­tics thanks to ECB in­ter­ven­tion.

His com­ments, in an in­ter­view with The Wall Street Jour­nal, are a di­rect re­buke to Ger­man Fi­nance Min­is­ter Wolf­gang Schäu­ble, who ear­lier this year blamed the ECB for a rise in pop­ulism.

“To say it’s the ECB’s mon­e­tary poli­cies that are fu­elling pop­ulism sounds like pop­ulist rhetoric to me,” said Mario Vella, who sits on the ECB’s Gov­ern­ing Coun­cil.

“Had there not been those poli­cies in place, I think Euro­pean economies would have been worse off,” he said. “Con­trary to what has been sug­gested, that would have fu­elled pop­ulist rhetoric.”

The ECB says its very ac­com­moda­tive pol­icy, in­clud­ing large-scale as­set pur­chases and neg­a­tive rates, have re­vived growth and held off de­fla­tion in the cur­rency bloc. Economists say that fall­ing prices, or de­fla­tion, are dan­ger­ous be­cause they can weaken con­sump­tion and raise the cost of debt.

Th­ese ag­gres­sive ECB poli­cies have, how­ever, come un­der heavy crit­i­cism in Ger­many, where bankers, politi­cians and cit­i­zens la­ment lost in­ter­est in­come. The out­cry reached a crescendo in April when Mr Schäu­ble said that the ECB’s low-in­ter­est rate pol­icy was to some ex­tent re­spon­si­ble for the rise of a far-right party in Ger­many. Mr Schäu­ble later walked back the com­ments.

The Mal­tese gover­nor, whose term at the bank be­gan in July, said that ECB pol­icy had to be “steady on as is, un­til we have data which shows the con­trary.”

Dr Vella gave lit­tle away re­gard­ing the ECB’s closely watched meet­ing on De­cem­ber 8, where the cen­tral bank is widely ex­pected to out­line the

fu­ture of its €80 bil­lion-per­month bond-pur­chase pro­gram, which is due to end in March.

Many economists ex­pect the pro­gram to be ex­tended by at least six months.

“The clear an­swer is you have to wait till De­cem­ber,” he said when asked about fu­ture ECB pol­icy. “What­ever hap­pens will not be sud­den and will de­pend on how things de­velop be­tween now and then,” he said. “Clearly what­ever is done would be based on em­pir­i­cal ev­i­dence.

“I don’t think any­one is ex­pect­ing any sud­den rup­ture with any­thing. That would be ab­surd and crazy.”

His and other com­ments un­der­score the im­por­tance of the ECB’s De­cem­ber meet­ing, when it will have new fore­casts for growth and in­fla­tion to 2019.

On Wed­nes­day, Gov­ern­ing Coun­cil mem­ber Ardo Hans­son told The Wall Street Jour­nal: “At some point of time we have to say what comes after March, one pos­si­bil­ity is to do that in De­cem­ber.”

The 63-year-old Libyan-born cen­tral banker took the helm of Malta’s cen­tral bank after a ca­reer in academia, in­vest­ment pro­mo­tion, and be­ing pres­i­dent of the Mal­tese Labour Party.

From the late 1970s to the early 1980s, he was a mem­ber of the now ex­tinct Com­mu­nist Party in Malta. In the early 1980s, he stud­ied in East Ber­lin. He said that in his younger days he “had very strong left-wing lean­ings.” When asked if he still did, he sug­gested he didn’t think he could be the gover­nor of a cen­tral bank if that were the case.

“I can now say that th­ese ex­pe­ri­ences were driven by an in­tense in­tel­lec­tual cu­rios­ity and, all in all, they have had a pow­er­ful ma­tur­ing ef­fect on my un­der­stand­ing of Europe and the world,” he said in an email fol­low­ing the in­ter­view.

Dr. Vella and his team stressed the ben­e­fits of glob­al­iza­tion and trade, also for peo­ple on low in­come. “Trade brings growth. And growth favours the most vul­ner­a­ble in so­ci­ety,” said the cen­tral bank’s chief econ­o­mist, Aaron Grech.

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