Draghi, Germany clash over ECB's stimulus

A simmering war between ECB chief Mario Draghi and Germany erupted into the open after the bank unleashed an unprecedented stock of ammunition to light a fire under chronically weak inflation.

The Italian central banker, who heads the European Central Bank, was portrayed on the frontpage of Germany's influential business daily Handelsblatt with a cigar on his lips and holding a 100-euro bill that was going up in flames. Bild daily referred to Thursday's announcement as a "shock", while the federation of exporters called the decision "disastrous" and "a robbery of savers". On Thursday, the ECB slashed already record low interest rates even deeper, said it would pump massive new sums into the banking system and, for the first time, would start buying corporate bonds. The aim is to get credit flowing to households and companies, thereby inducing them to spend and invest. But it also means that putting money in a bank will no longer pay.

For a nation of savers like Germany, that is nothing short of a capital sin.

Handelsblatt railed against "Mario Draghi's dangerous game with German savers' money" in a commentary that gave the impression that the policy was meant to hurt Germans and Germans alone. It felt all the more personally targeted because Germans had it "drummed in their heads for years that they should save for their retirements," Carsten Klude, economist at the bank M.M. Warburg, told AFP. In a country where the population is fast ageing, and where the pension system is more vulnerable to shocks, public institutions have traditionally offered the people strong incentives -- through tax rebates, for instance -- to squirrel money away. German bank accounts also often offer competitive interests. "But now people see that saving does not pay. And they feel cheated," said Klude. "The German position is understandable," said Sylvain Broyer, economist at Natixis. Broyer estimates that the country needs an interest rate at around 2.0 percent rather than zero in order to maintain macro-economic stability. He noted that the cheap money policy has driven Germans to invest in property, thereby sending prices sharply up in recent years.