FRANKFURT The head of the ECB robustly defended its cheap money policy on Thursday against sharp criticism from Germany, as the country's leader entered a debate that has driven a wedge between the euro zone's central bank and its biggest economy.
Mario Draghi said the ECB's policy of printing money and keeping borrowing costs at rock bottom was working, adding that interest rates would stay at current record lows for a long time.
Emphasizing the bank's right to independence from political interference, Draghi also called on euro zone governments to help get the region's sluggish economy on a more solid footing through economic reforms.
Speaking to reporters after the bank's governing council held key rates, he said harsh criticism in Germany undermined the ECB and its attempts to buoy the economy, playing down complaints that low rates were squeezing savers.
"We obey the law, not politicians," Draghi said, underscoring his commitment to the ECB's primary task of keeping inflation ticking steadily up.
Criticism by politicians in Germany has escalated amid fears that the ECB could even start to hand out free or 'helicopter money' to citizens.
No sooner had Draghi spoken, German chancellor Angela Merkel took the unusual step of describing the debate about the ECB's low interest rates as legitimate.
"That there are people in Germany who discuss the fact that interest rates have been much higher is legitimate," she said, in an acknowledgement that savers' concerns were genuine.
Speaking earlier, Draghi had sought to calm German fears, throwing cold water on helicopter money or similar ideas.
But he argued that there was little alternative to the ECB's course of money printing and low interest rates in a world where economic prospects were dim.
"Criticisms of a certain type could be viewed ... as endangering the independence of the ECB," he said, adding that this would delay investment.
"The result... is that it will take longer ... to produce the results that we want," he said, arguing that this would only result in further ECB action.
Draghi's remarks were in response to increasingly bitter criticism in Germany, where savers, banks and fund managers have been vocal about the impact of low rates.
Finance Minister Wolfgang Schaeuble recently even argued that ECB policy was partly to blame for the rise of the right-wing anti-immigration Alternative for Germany (AfD).
Draghi answered personal criticism in Germany, where many associate his home country of Italy with economic mismanagement and where conservative politicians recently called for his successor to be a German.
While acknowledging the complaints of savers and banks about the impact of low interest rates, he said there was little alternative.
"Would a non-Italian president run different policies?" he said. "Our policies are the same policies that are being enacted in other parts of the world," he said, referring to low-interest-rate policies globally, saying that the ECB's governors from around the 19-country bloc stood behind him.
Draghi struck a more guarded tone than in an earlier press conference, although reiterated his pledge to act if there were to be an upset to the economy.
"We are going to have low inflation for a long time. We should be patient," he said, pointing to the likelihood that price inflation would slip below zero in the coming months.
Inflation is a barometer of economic health and used as a yardstick of success for the ECB money printing.
When it slips below zero, investors typically look to the ECB to respond although Draghi's call for patience could indicate that it will take its time.
Some economists nonetheless took heart. "The ECB is still on high alert and would be willing to implement even more stimulus if the recovery falters," said Carsten Brzeski, an economist with ING.
The value of the euro, which typically rises or falls depending on how much ECB action investors expect, was flat following his remarks.
ECB governors from around the euro zone decided to keep the cost of borrowing for banks at zero while it will continue to charge them 0.4 percent for parking money at the ECB.
Central banks worldwide have been keeping money cheap. Sweden's central bank expanded its asset-buying scheme on Thursday, despite the fact that its economy is in danger of overheating.
Despite a rally in oil prices, investors are still skeptical that price inflation in the euro zone will rebound in the long term.
(Additional reporting by Francesco Canepa; writing by Mark John; Editing by Jeremy Gaunt and John Stonestreet)