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Germany's Schaeuble calls on Lagarde to respect ECB's 'limited mandate'

BERLIN (Reuters) - Former German finance minister Wolfgang Schaeuble told Reuters in an interview he expects new European Central Bank President Christine Lagarde to implement a “very sensible” monetary policy that respects the limits of the ECB’s mandate.

German Bundestag President Wolfgang Schaeuble is pictured in his office during an interview with Reuters in Berlin, Germany, November 4, 2019. Picture taken November 4, 2019. REUTERS/Fabrizio Bensch

The comments by Schaeuble, a fierce critic of the ECB’s ultra-loose monetary policy of sub-zero interest rates and bond-buying programs, highlight Lagarde’s challenge in healing a rift between euro zone members left by her predecessor Mario Draghi.

Speaking in his office as Bundestag president in the German parliament’s Reichstag building, Schaeuble highlighted his personal ties with Lagarde, with whom he worked closely during the euro zone debt crisis when she was French finance minister and then managing director of the International Monetary Fund.

The veteran conservative lauded Lagarde’s broad international experience and said he expected she would “surely pursue a very sensible” and powerful monetary policy.

“But the mandate of the ECB is limited, because an independent central bank is only justifiable in democratic terms when it has only a limited mandate,” Schaeuble added in a thinly veiled attempt to remind Lagarde of the frustration among German savers about the ECB’s unprecedented long period of zero rates.

Critics from Germany and other northern euro zone countries have accused the ECB and Draghi of stretching and even overstepping the central bank’s mandate with its decision to buy sovereign bonds.

Mirroring that dissatisfaction, senior German conservative lawmaker Alexander Dobrindt urged Lagarde on Tuesday to turn her back on Draghi’s “ersatz structural policies... We need a turn of the tide on interest rates,” he said.

In 2016, Schaeuble accused the ECB and Draghi of being partly responsible for the rise of the far-right, euroskeptic Alternative for Germany (AfD) party.

Lagarde on Monday showered praise on Schaeuble during an award ceremony in Berlin, using her first speech since taking over at the ECB to signal a willingness to work with all sides.

In an address that did not touch on monetary policy, Lagarde honored Schaeuble’s commitment to a united Europe and his statesmanship since the 1989 fall of the Berlin Wall, which allowed a divided Germany to reunite.

Additional reporting by Michael Nienaber; Editing by Mark Heinrich