Draghi hits back at German critics

European Central Bank (ECB) president Mario Draghi took on his critiques from Germany, which includes, German finance minister Wolfgang Schäuble while speaking at the annual meeting of Asian Development Bank.

According to him, it is not ECB to blame for lower or even negative interest rates but global savings glut, which has also been mentioned by former FED chairman Ben Bernanke. According to him, today about 18% of global economy is operating under negative rates and 40% under 1%.

Mr. Draghi said, while low or negative interest rates are to be blamed for lower returns in insurance, pension funds and at banks and put existing business model under threat, they are not the problems. Lower rates are more of symptoms than problems, it is global excess savings and lack of willingness to investments are the causes behind.

Moreover many countries like Germany and Euro Zone as a whole playing their part. Germany had 5% surplus for almost a decade. But that money with low real rates globally can’t generate the return it used to.  In such environment central banks are right in lowering rates, which is boosting demand for investments and without ECB’s support, growth in Eurozone would have been much more grave.

Mr. Draghi took extra on Mr. Schäuble, who has been a critic of lower rates but unwilling to do more fiscal spending by saying that those who call for higher rates necessarily imply a larger role for fiscal policy to raise demand.