Mario Draghi vs. Germany: The Fallout From European Central Bank's 'Big Bazooka'

Head to head: Draghi and Weidmann
Head to head: Draghi and Weidmann
Bundesbank, European Central Bank
Florian Eder, Anja Ettel and Martin Greive

BERLIN - Even the ever competent European Central Bank (ECB) President Mario Draghi stumbled when he was asked how he was dealing with the fact that the Germans had reservations about his latest moves. That’s because the journalist at last week’s press conference didn’t address him as "President Draghi," but as "Herr Weidmann."

Of course, Jens Weidmann, president of the mighty Bundesbank (Germany’s central bank), is currently Draghi’s most bitter foe. The 44-year-old Weidmann was the only member of the ECB’s executive board to vote against Draghi’s plan to save the euro.

The Draghi plan calls for conditional but unlimited ECB purchase of government bonds from euro crisis countries. It is the big "bazooka" that many politicians and experts have been hoping for a year now would be brought out, but that many Germans fear because it could bring inflation with it. But Draghi has lined it up, and will be firing shortly.

The plan program, called the Outright Monetary Transaction (OMT), will be terminated when goals have been reached, Draghi said. With a bit of luck, that could be in a few months’ time. It could also be never.

What is clear, however, is that it’s a game-changer for the ECB, in that it is now in the business of financing national budgets. It will also in the future play a supervisory role with regard to the European banking system.

And that means that the ECB is developing away from the institution on which it was modeled – the Bundesbank – and could become a kind of “branch office” for European financial policy. Instead of the tiresome process of persuading national parliaments to approve additional billions to rescue a crisis-ridden country in Euroland, governments in the future could count on the fact that the ECB would continue to buy that country’s government bonds until the interest rates on those bonds were brought back down to a reasonable level.

This is not without potential dangers, not least because some crisis countries could put the brakes on reform if politicians know that under certain conditions the ECB can be called in to play fireman and extinguish the blaze. Draghi knows that too. Hence, the ECB will only step in when a crisis country officially seeks help from the European Stability Mechanism (ESM) and follows ESM conditions. Many observers say this was a particularly clever move, as ESM programs are agreed on by the Eurogroup, so no German finance minister can block planned help by voting against it.

Although he had wanted to avoid public statements until the German Constitutional Court takes its decision with regard to the ESM on Wednesday, after the ECB executive board meeting Bundesbank president Weidmann released a statement that said that he regarded “such bond purchases as being tantamount to financing governments by printings banknotes.” Furthermore, the “announced interventions carry the additional danger that the central bank may ultimately redistribute considerable risks among various countries’ taxpayers.”

Some of those close to Weidmann were unimpressed with the announcement: “Longer term, he didn’t do himself any favors,” said one.

The next rift

The next disagreement could follow in a matter of weeks, because the ECB is expected to shoulder another burden besides financing governments: according to European Commissioner for Internal Market and Services, Michel Barnier, the ECB should function in a supervisory capacity with regard to euro-zone banks.

The new development has already encountered resistance on the part of German Finance Minister Wolfgang Schäuble who told German radio that he did not believe the ECB has “the potential to supervise … 6,000 banks in the foreseeable future.”

Such a strong role could threaten the independence of the central bank. In emergency situations, it has been the job of finance ministries to close and wind down banks – and take the pressure that a decision of that type can bring with it. One EU diplomat said that in his view a potential danger of the Barnier plan lay in governments suing the ECB in the event of bank bankruptcies and accusing them of having failed in their supervisory role. "Where would the central bank be then?"

But it would virtually impossible to reverse course. And whoever had thought that the Bundesbank, as major shareholder, could quash decisions not to its liking has set themselves up for disappointment. "The ECB is developing its own character. It’s not the Bundesbank, and we have to deal with that," says Ulrich Kater, chief economist at DekaBank.

What could result is a mixture of Bundesbank dogmatism that values financial stability above all else, and the pragmatism of southern countries. The danger is that it slants too much south. Says one German currency watchdog: "There’s no way the euro should be rescued at any price."

President Draghi sees things differently. He says the ECB will do everything to save the euro: "The euro is irreversible.” Germany’s Chancellor Angela Merkel sings a similar tune: "If the euro fails, Europe fails." The difference is that Merkel is an elected official – and Draghi isn’t.

"Elected governments will decide if the euro should be rescued or not – that is not the business of the ECB or its president," said Markus Kerber, a professor at Berlin’s Technical University who initiated a lawsuit against the ESM and is keeping his options open to do likewise as regards the ECB.

At his very first press conference as ECB boss, Draghi stated: "I have great admiration for the tradition of the Bundesbank. I was in the Treasury in Italy in the 1990s and we had many opportunities to work with Hans Tietmeyer and Helmut Schlesinger, so I developed a very great admiration for this institution throughout these years. As for the future, let me do my work and we will have periodic checks as to whether I am in sync with this tradition or deviating from it.”

We now have the answer.

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How Low Trust In Government Fuels Violence Against Politicians

The deadly stabbing of UK MP David Amess confirms this researcher's ongoing study on trust and governance in democracies around the world: It's bad.

Tribute to slain UK MP David Amess in Leigh-on-Sea on Oct. 15

James Weinberg

The killing of British Conservative MP David Amess, who was stabbed to death in his constituency on October 15, is a tragic moment for democracy. What makes it even more devastating is that such a catastrophic failure is not without precedent or predictability. Labour MP Jo Cox was shot at her constituency surgery in 2016. Before her, another Labour MP, Stephen Timms, survived a stabbing in 2010. And Andrew Pennington, a Gloucestershire county councillor, died in a frenzied attack in 2001 while trying to protect local Liberal Democrat MP Nigel Jones.

This is to say nothing of the 2018 attack on the Palace of Westminster that left police officer Keith Palmer dead and MPs in a state of shock.

Beyond these critical junctures in the public debate about politicians' safety, elected representatives must live with an increasingly insidious level of popular cynicism that threatens violence on an almost daily basis.

Between the divisive politics of Brexit and the growing polarization of British party politics, MPs currently work in a low-trust, high-blame environment. Even before the existential angst and subsequent politicking of the COVID-19 pandemic, a recent Hansard Society audit of political engagement concluded that “opinions of the systems of governing are at their lowest point in the 15-year Audit series – worse now than in the aftermath of the MPs' expenses scandal."

The ramifications of governing in such an age of distrust are significant for the mental health and wellbeing of politicians. With colleagues, I've argued that such visceral and endemic distrust is a key stressor in political life. People are not simply wary or skeptical of politicians, they now routinely criticize their personalities and dismiss their good intentions. At its most severe, this “distrust stressor" manifests in the growing threat of physical violence faced by politicians.

Unfortunately, the distrust stressor is commonplace in the febrile climate of post-millennial UK politics. Serious cases of stalking and harassment have become a “common experience" for MPs. In the UK general election of 2017, for example, 56% of surveyed parliamentary candidates expressed concern about the levels of abuse and intimidation they had received and 31% said they had felt “fearful" during the campaign. Misuse of anonymous social media accounts has intensified these problems and created a toxic environment for elected politicians that regularly exposes them to online rape and murder threats.

Governing under threat

As part of an ongoing study of trust and governance in five democracies around the world, I recently carried out more than 50 in-depth interviews with junior and senior politicians in national legislatures, including questions on the stresses and strains of political life.

Reflecting on the ramifications of simply doing their job, one Conservative MP commented:

There have been votes that have been controversial, and you can then get a lot of abuse as a result of picking a side. My office has been vandalized, I've had stuff sent to me in the post, I've received death threats. And you do build up a very thick skin doing this job, there's no shadow of a doubt. Because one week in it, if you're not able to roll with the punches, you won't see through a whole term.

Almost 40% of interviewees were able to cite more than one instance of serious abuse or threats of physical violence. Not only are these experiences felt across both sides of the political aisle in the UK, but they also appear to be growing more common in other democratic contexts where the climate of politics has been presumed to be both calmer and more volatile. As one MP in New Zealand told me:

I've had some pretty horrible death threats and I've had a lot of abuse, particularly through social media. But also, funnily enough, in writing and phone calls. Unfortunately it's becoming more part of our political life.

Another, this time in South Africa, said:

What [this group of constituents] were saying is that if the water supply was not fixed by a certain time, they were going to kill me. And what they did is they took a tyre and said that this tyre was going to go around my neck and they're going to light it and that was going to be my demise. Listen, when you see your life flash before your eyes… you start to question whether it's worth it.

In the UK, analysis of data from the Representative Audit of Britain (a survey of all parliamentary candidates who stood in general elections between 2015 and 2019) suggests that the harassment, abuse and intimidation of elected and aspiring politicians is also highly gendered. Women politicians, and black and minority ethnic women in particular, experience a disproportionate share of sexualized abuse online. They also receive more aggressive and sexualized threats offline.

Contact between politicians and the public is at the very heart of effective democratic representation.

It is relatively easy to understand why all this would be detrimental to politicians' professional competence and their sense of personal worth and wellbeing, but it is harder to find solutions to this crisis.

Home Secretary Priti Patel has called for increased security measures in the wake of Amess's death. This is welcome but it's an instrumental response which might not be easy to implement. Political contact between politicians and the public is at the very heart of effective democratic representation – and it is unlikely that most MPs will agree to suspend constituency surgeries or fill their offices with armed guards at a time when governor-governed relations are already so strained.

Photo of \u200bNew Zealand's parliament in Wellington

New Zealand's parliament in Wellington

Guo Lei/Xinhua/ZUMA

Compassion and education

While specific issues around MPs' security and training are grappled with, we also need a call for conscious restraint and compassion in political discourse. When some politicians themselves resort to dog-whistle populism, verbal abuse and infighting, it broadcasts an image of politics as an arena for incivility. At the same time, it perpetuates a binary worldview that crowds out the possibility of empathy and compromise.

Alongside this, we need to overhaul the media coverage of politics. Increasingly intent on personalizing the political and politicizing the personal, a 24-hour news media too often drip feeds blunt stereotypes about politicians' personalities and motives. In contrast to much news coverage of politicians, my own research with hundreds of elected MPs and councillors has shown that the majority enter politics with an extraordinary dedication to improving the lives of others that is rarely perceived or appreciated by those they govern.

A deficit in democratic education leads to inflated public expectations about what is possible.

Equally important, nations around the world must commit to fully funded and well-resourced programmes of democratic education. Politics is messy and full of contingencies, and a deficit in democratic education leads to inflated public expectations about what is possible or desirable. In turn, this breeds disappointment and lowered self-efficacy, which together disrupt the positive potential of deliberative participation.

Ultimately, there is no place for political violence, harassment or intimidation in a functioning democracy. At the very least, politicians are ordinary humans attempting to undertake an extraordinary job on behalf of everybody else. Whatever their political views, nobody who has the courage to "step into the arena", to paraphrase Theodore Roosevelt, deserves to fear for their life in the pursuit of public service. To say that we need to rediscover civility and respect in our politics is once again an understatement of a devastating truth.The Conversation


James Weinberg is a lecturer in Political Behavior at the University of Sheffield

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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