Draghi: Der Spiegel Interview

This interview provides a useful end-of-year perspective on the current agenda facing the ECB: here.

34 replies on “Draghi: Der Spiegel Interview”

Der Spiegel had been one of the saner German papers – Draghi may as well have given an interview to the Bild Zeitung.

So no one on the ECB council is politically motivated (certainly Prof Honohan is “Snow White”)……and there is no plan B.

Everything is so much better than before……ah! Except debt levels, unemployment levels, political consensus, etc.

The ref to reduction of imbalances is always interesting…..what’s never conceded is that this is happening is largely to decline in demand….cannot be good for exporting Germany…or anyone.

Still, have to admire the PC (for Germans) of his answers. Thankfully, he is more politically astute than his predecessors….and a reasonable central banker too. Seems he is the only one capable of making a difference at ECB level……despite being Italian……being reasonably acceptable to Germany is important.

However, forget about debt restructure anytime soon for Ireland….very far down the priority creditor list……that simply has not and will not change anytime soon.

Welcome to a new era of polarization as financial oligarchy replaces democratic government and reduces populations to debt peonage

Europe’s Deadly Transition From Social Democracy to Oligarchy


‘There is no technological or economic need for Europe’s financial managers to impose depression on much of its population. But there is a great opportunity to gain for the banks that have gained control of ECB economic policy. Since the 1960s, balance-of-payments crises have provided opportunities for bankers and liquid investors to seize control of fiscal policy – to shift the tax burden onto labor and dismantle social spending in favor of subsidizing foreign investors and the financial sector. They gain from austerity policies that lower living standards and scale back social spending. A debt crisis enables the domestic financial elite and foreign bankers to indebt the rest of society, using their privilege of credit (or savings built up as a result of less progressive tax policies) as a lever to grab assets and reduce populations to a state of debt dependency.

The kind of warfare now engulfing Europe is thus more than just economic in scope. It threatens to become a historic dividing line between the past half-century’s epoch of hope and technological potential to a new era of polarization as a financial oligarchy replaces democratic governments and reduces populations to debt peonage.’


@Colm McCarthy

’bout time you wrote one of your slightly caustic empirical pieces to enlighten Der Spiegel readers.

@Philip Lane & (nearly) all

Season’s Greetings!

The bundeskanzlerin in her New Year’s message says: “The courage for new small beginnings” must be preserved in 2014.

It’s good that Mario Draghi generally avoids riddles while it’s welcome to have an informed sceptical journalist doing the interviewing.

The Eurozone’s retail purchasing managers’ index covering the big 3 markets, fell again in December. So the situation remains fragile.

Europe’s biggest infrastructure project, the £14.8bn Crossrail programme, is on track in London as it approaches its halfway point but within the EMU, magic bullets are not very visible overground.

Europe’s biggest companies put more than 40% of their investments in emerging markets.

There is reform fatigue of course and prayer wont get Italy out of stagnation while further afield, Shinzo Abe has more arrows to fire.

Yesterday, John Cridland, head of the CBI, the UK’s biggest business lobby, called on business to raise pay in 2014. Don’t expect his Irish counterpart in Ibec to break any moulds.

It’s two decades since Europe experienced huge currency turmoil and here is a compelling 1997 BBC documentary on the 1992 exit of sterling from the European Exchange Rate Mechanism:


On what became known as Black Wednesday, when the Bank of England raised its benchmark rate to 15%, Sweden’s Riksbank raised its overnight rate to 500% to defend the krona.

The questions put to Draghi were representative of popular misgivings in Germany regarding the actions of the ECB and failed to go very deep. 2014 is shaping up to be an interregnum year, dominated by the arrival of the SPD in government, the elections to the European Parliament in June and the jockeying for positions in the new Commission. In the background, the ECB will be carrying out the AQR tests in the expectation that all will come together in November!

The SPD is already punching well above its weight in the new coalition because of the capacity of its ministers, notably Gabriel, Steinmeier and Nahles. This paper is of interest in the overall context of assessing the likely direction of German economic policy.


The expanded ministerial brief of Gabriel in the energy and industrial sector seems of particular significance, especially against the background of the case taken by a group of users on competition grounds to the Commission. Draghi trots out the standard comment of Merkel that one does not make the weak stronger by making the strong weaker. This would have some relevance if this was what was actually being attempted.

Sony Kapoor’s recent FT comment is pertinent as it underlines what needs to be done in all EU countries with regard to reform and the completion of the Single Market. While the leaders are busy elsewhere, there may even be progress on this front.


This article in the FAZ underlines the divide in IG Metall, the major industrial union, with regard to the supports given to German industry in the energy sector i.e. between the interests of their members as employees of German firms and the interests of consumers in general. The implications for competition in an EU context are a minor concern. (This is a long-standing feature of the German approach i.e. viewing competition issues solely in a domestic context when countries are required under the treaties to accept the Commission view on any possible wider EU competition implications).

http://www.faz.net/agenturmeldungen/unternehmensnachrichten/ig-metall-vize-stuetzt-merkel-im-streit-um-oekostrom-rabatte-mit-eu-12724281.html c

The bulk on the economic commentary in Germany is highly critical of the elements in the programme for government insisted upon by the SPD, one leading expert stating bluntly that the idea of Germany making a move to renewables on her own makes no sense – a view which Gabriel may possibly agree with – and that the introduction of a statutory minimum wage will destroy jobs. The overall impact of what has been agreed with the SPD is viewed as putting the economic prosperity of Germany at risk. Of whom in Germany is, however, rather the question.

In sum, developments in policy areas in Germany unrelated to banking, and how these are translated into action at a European level, seem likely to have the biggest impact during 2014. This is especially true of the issue of free movement and the alleingang of the UK in the matter.


All against the background of a growing euro-scepticism across Europe!


The EMU is more than Germany and the price of electricity is not going to be a key catalyst of change.

As for Sony Kapoor and the headline ‘European banking union is a sham that solves nothing,’ it may seem a sham now but once the system is operational, it will be tweaked as new institutional structures generally are in light of experience.

SPD or not, there will be no huge changes in just a year. Besides, a debt brake limits flexibility for spending.

@ MH

That is not what I am saying. To put the matter another way, my view is that the focus will shift from banking union – apart from the interminable negotiations with the EP; which will get little attention – to the question of getting growth going on the basis of a centre-left view of how this should be done.

Where Merkel fits in is difficult to assess. The last European Council was certainly no great success for her.


The only inspired story from her neck of the woods over Christmas is that she is out to stop JC Juncker from becoming the leading candidate fro the CDs in the European elections.

There is also, as far as I can see, no evidence of the emergence of the hook on which Cameron seemingly intended to hang his campaign for “reform” of the EU (which would make it fit, in his eyes, to merit continued UK membership) i.e. a push for treaty re-negotiation with the indispensable support of Merkel.

Driven by some suspicion, Angst if you want to term it so, that we might actually face more frequent/serious Elbe flooding, BECAUSE we cleaned the air so successfully, I wanted to work on this first, but

Let me give a few comments to Draghi from the perspective, which I believe pretty much reflects German mainstream, at least on a certain level:

I found Draghi’s interview pretty reasonable, his job is “We run monetary policy for the entire euro area ….” and not just the one to 2 third fraction, dependent how you count, Germany is the poster /whipping boy for.

Some details:

The LTRO was a pretty good idea, attributed to Draghi, to achieve certain results, somewhat heretic, but within bounds.

The OMT announcement, with the important caveats (within our mandate, strict conditionality) was pretty successful

Jörg’s “family reasons” are sort of the standard explanation. That he is groomed to be the next German finance minister, is not something to be said so, and especially not by Draghi.

“Perverse Angst” seems a little bit exaggerated, but he addresses a relevant point. E.g. Low stock ownership in Germany represents from my point of view an exaggerated risk aversion.

“Draghi: The crisis has not been overcome, but there are many encouraging signs”. My view is, in tune with the statement of the 5 in Washington, actually more optimistic.

“Repetita iuvant – to repeat is beneficial”, something I also had to learn over the last few years.

Just like Draghi, I believe the fears of introducing a universal minimum wage in Germany, and some modifications of the retirement rules (at 63, only after 45 years of working) are exaggerated.

His comments on insurance companies payouts, and that there is the big elephant in the room, the FED, all reasonable and agreed on from me, especially including “Normal and healthy it is not”.

Convergence rather than conflict, a tough German woman (we seem to have a lot of them : – ) on the ECB Executive Board.

I do look with significant confidence into the future.

re; SRM
“Draghi: If urgent action is needed we’ll have a fast-track procedure that gives the Council and the Commission 24 hours to decide on proposals of the Board of the resolution mechanism. If they don’t decide a bank faces liquidation, so there will be enough pressure to find a solution.”

That is the first time I have heard Draghi (or any EZ official) being so direct in relation to liquidation of banks.
Lets hope Ireland will have suitable liquidation rules in place for that possibility /eventuality. If the government can drag itself away from the victory parade of ‘exiting the bailout’.

Draghi said something like “we are not in a Japanese situation” but as English footballers often say, it’s early doors innit.

“SPIEGEL: In Germany, ECB policy is unpopular because you have now pushed the interest rates for investments down so far that they are often no longer enough to compensate for inflation. In other words, only fools save.

Draghi: That’s not the fault of the ECB The link between the short-term interest rates set by the ECB and the long-term interest rates paid on investments which are relevant for savers in Germany is not very strong.

SPIEGEL: Really? It’s a stated goal of your policy to indirectly suppress long-term interest rates.

Draghi: No, especially in recent years, we were unable to control long-term interest rates – because investors were very unsettled by the euro crisis. That’s why everyone has been taking money into Germany to buy safe German government bonds. That’s why the interest rates in Germany have fallen. We take the concerns of savers very seriously. But how can we respond? We run monetary policy for the entire euro area, not for a single country. If we are able to dispel the uncertainty, many investors will again take their money out of Germany and back to their home countries and interest rates will rise again.”

Draghi’s reasoning on the connection between the ECB rate setting and returns to savers eurolandwide is difficult to swallow. So dodgy banks in various countries in Euroland do not have to offer rates commensurate with risk would be a more plausible explanation. It’s not only Germany that have savers.

Minor points on ‘Repetita iuvant’:

[1] The ECB(undesbanke) is NOT a functioning ‘CENTRAL’ Bank.

[2] So called ‘Representative’ Democracy in the EuroZone is NOT ‘representative’ of the interests of the EZ Citizenry. It has been totally ‘captured’ by the Banking/Financial_System Oligarchic Dictatorship.

[3] The EZ Citizenry has yet (if ever) to wise up and RISE UP.

Escapism time ….

Springer of Germany the international publishing, science and media group has published as one of a series of books covering the world. One titled: National Intellectual and Financial Crisis in France, Germany, Ireland and the UK.

There is little that we are not familiar with other than it being put in quite blunt terms by the authors Carol Yee-Yun Lin, Leif Edvinnson, Jeffrey Chen, Tord Beding.

Happy New Year,

David O’Donnell

Now, tell us, what party/group in Germany would be representative of your views, maybe together with a few comments, why you think so?
How many votes did they get?

The Bremen Town Musicians

cf Grimm! Comment on Deutsche ‘robbers’ un_necessary.


Who gives a f*ck what party in Germany represents Irish views? Apparently, the idea of (non-German) national sovereignty is still a hard one for your people to get your heads around…

Big surprise: no party in Germany is in favour of justice for any other country. Plus ça change…

@ Ernie “Who gives a f*ck what party ”
For the bad manners in that response, you should be barred from further comments.

We must always keep in mind that original German thinker Von Clausewitz and never forget he revealed to the world that “Nations do not have friends, they have interests.”.

Ireland will be taken care of from a German point of view when they deem it is in “their” interest to do so.

So how do the Germans view Ireland.
Merkel viewed Kenny as a kindred spirit who was naturally austere and would impose order on his unruly countrymen. She did not know that Irish TDs keep their eye on the ball and the ball is called “prospects of being re-elected”.

The SPD are aware that their largest and most successful corporations are investing abroad, near and far. An army of desperate unemployed people on the periphery are likely to entice some of that German investment to the periphery. Hence job loss in Germany motivates them to be kind to the periphery.

The Greens are the greens and would like to see organic moss farms, wind farms, fields of photovoltaic panels.

Of course all the German investment outside of the EU is enabled by the flood of funds from the periphery into Germany resulting in rates as low as 0.09% for one year bonds/treasuries. How helpful freedom of movement of funds is to Germany and damaging to the weak sisters on the outskirts. Or is it helpful to the Chinese, Brazilians, Indonesians…….

One thing is sure, the tide will turn.

@ Mickey Hickey

cf. this paper.


All nation states act in their own interest. (I think it is Lord Palmerston who is most quoted as making this point.)

The countries of the EU are functioning democracies and none is either entirely in charge or blameless with regard to the recent economic crisis. The issue to be addressed is the likely future course of events. The one-sided view taken by Merkel is clearly being eclipsed with the arrival of the SPD in government. The Greens are irrelevant.

This link is also of interest.


There are signs of a return to business as usual (which is a lot better than conflict in an atmosphere of crisis).

What is striking in the case of all countries, big and small, is the national bubble in which academic economic debate seems to take place, the Irish Economic Policy Conference 2014 with the title “Economic Policy after the Bailout” being a good example.

David O’Donnell

reminds me a little bit of my student times. The smaller the left sectarian group, the louder the claim to be the true representative of the revolutionary masses, just nowhere to be seen at the voting booth or marching in the streets. Begin of 1989 we organized student strike and demonstrations in Munich, with over 50 000 out of 150 000 marching.

When we had our peaceful revolution here in East Germany, 100 000 were marching on a weekly schedule (Montagsdemonstrationen) in the streets of cities of 500 000 and shouting “Wir sind das Volk”. The old regime had the guns, but it was very clear who the majority were.

So, until David organizes 100 000 marching through Dublin, we will stick with the existing treaties and constitutions. I doubt that he can mobilize even 100. (Or …. ? : – )

@ Mickey

I have the same information as DOCM, that the quote is for Lord Palmerston. If you have some evidence linking it to Clausewitz, I would be interested.

@ seafoid
I sea social democracy and social market economy pretty much alive and kicking.

The German voters have just expressed their will in September. We have a brand new government, with over 80 % of the vote in parliament, enough to change the constitution, if we feel like it. With a coalition treaty which is very clear on our position with respect to Europe. Over 75% of the social democrats voted for it.

What more do you want?


I am in full agreement with Draghi on the very limited influence of the ECB on long term rates.

Since the “currency manipulators” at the FED are massaging down the US long term rates

to where they want them to get house prices via mortgage rates to where they want them,

with a “fair value” of about 1.25 $/Euro (vs the present 1.38) as a long term expectation,

firmly anchored inflation expectations of 2.0% on both sides, as the official targets,

core Euro interest rates about 1% lower are the simple result of financial arithmetics,

as long as the revolution is postponed indefinitely : – )


this is more than 3 years ago, before the bailout, and hardly any kind of revolutionary, and the anarchists were counted to 100.


Back to school …. er kindergarten.

You remind me of “Prudent Hans” …


Thanks for the two links, very interesting.

@francis @DOCM
Von Clausewitz wrote On War which was published in 1832 before his death in 1831. There are a number of original quotes in that book, such as war being politics by other means. There are arguments that Sun Tzu made similar statements. Von Clausewitz I read before I got married since my future father in law who spoke Russian and German and knew about strategy and tactics quoted him often when explaining to me Germany’s place in the world. In my estimation Von C was one of the worlds great military theorists and a man of pure genius.
As you know I come from Kerry where we are inclined to think that the British copied or stole any ideas that might be considered original. 3rd Viscount Palmerston was a British politician who as far as I have been able to ascertain has never written anything with the clarity and logic found in Von C.

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