(Fixes spelling of “backpedalled” in paragraph 5)
* Idea of sending free money to Europeans angers Germany
* Germany’s Schaeuble blames ECB in part for right-wing rise
* Chief economist laments Germany “shooting” at ECB
By John O’Donnell and Frank Siebelt
FRANKFURT, April 11 (Reuters) - Almost a month after stoking a divisive debate about how far it should go in pumping money into the flagging euro zone economy, the European Central Bank is trying to soothe relations with Germany after unusually strong criticism from Berlin.
Late last week, German Finance Minister Wolfgang Schaeuble was reported as blaming the ECB’s cheap-money policy in part for the rise of the country’s right-wing anti-immigration Alternative for Germany (AfD).
The discussion is likely to continue when ECB President Mario Draghi meets Schaeuble this week in Washington at the International Monetary Fund’s spring gathering of central bankers and ministers from around the world.
A storm of protest erupted in thrifty Germany after Draghi last month described the idea of “helicopter money” - sending money directly to citizens - as a “very interesting” - if unexamined - concept.
Late last week, top ECB officials, including the ECB’s chief economist and its vice president, backpedalled, saying the idea was not on the table. But the damage had already been done.
“The ECB’s policy was already unpopular in Germany and the idea of helicopter money was the straw that broke the camel’s back,” said Joerg Kraemer, an economist with Commerzbank in Frankfurt. “People feel that ideas like this are dangerous.”
German analysts see the idea as an excessive ramping up of a loose money policy that is already fuelling rising property prices in their country, and also because it would undermine the euro by printing money and giving it away for free.
On Sunday, a number of German politicians criticised the ECB’s stance, with one minister blaming low interest rates for putting a “gaping hole” in pensions, as rumours of possible legal action over helicopter money swirled.
‘NO TO EVERYTHING’
It marked a new low in the often fraught relations between the euro zone’s biggest country and the central bank’s Italian chief, who has recently bemoaned what he described as the “nein zu allem” (“no to everything”) approach - a swipe at Germany.
But the discussion about ever wider boundaries of possible ECB action, distracting from the ECB’s 1.7-trillion-euro-plus money printing scheme, also irritated some euro zone central bank governors, a person familiar with the matter said.
The ECB, which for years has struggled to improve its image with a sceptical German public, declined to comment.
But many at the ECB resent what they see as unrelenting criticism from German politicians, journalists and economists, who reject the ever more generous measures the ECB is taking to fire up the slow economy.
“I think this shooting at the institution, especially in this country, is sometimes difficult to swallow,” Peter Praet, the ECB’s chief economist, told a conference of economists last week in Frankfurt.
There seems little prospect, however, of the debate abating ahead of a meeting of the 19 euro zone central bank governors on April 20-21. A spokesman for Schaeuble’s finance ministry described it as a “legitimate discussion”.
Others forecast that the idea of sending money directly to Europeans could shadow such gatherings. “It will be hard to get the idea of helicopter money out of people’s heads,” said a euro zone official.
“The criticism in Germany is justified but a little dishonest,” said Commerzbank’s Kraemer. “There is no way Schaeuble would be balancing his books were it not for the ECB’s policy.” (Additional reporting by Thorsten Severin in Berlin; Editing by Mark Heinrich)