Europe’s top insurance boss has launched a blistering attack on Mario Draghi and the European Central Bank over the “politicisation” of monetary policy in the region. Oliver Bäte, chief executive of Europe’s biggest insurer Allianz, sharpened the language used by other German financiers and policy makers to criticise Mr Draghi, who hands the presidency of the ECB to Christine Lagarde this month.
Mr Bäte rebutted Mr Draghi’s assertion that it was overdue for eurozone governments to implement fiscal reforms rather than rely on monetary policy to fix Europe’s ills, and spoke as if addressing the outgoing ECB chief directly. “The reason why we’re not doing fiscal [reforms] is because you’re making it easy for people to spend money they don’t have,” he told the Financial Times in an interview.
“[People] say Draghi is independent. No, he isn’t.”
“I’m sorry. We actually created independent central banks in order to have this not happen, to have central banks not print money. [People] say Draghi is independent. No, he isn’t.” He accused the ECB of “multiplying risk” by combining its ultra-loose monetary policies with a failure to break the so-called doom loop of banks’ investments in government debt. Banks and insurers that invest in government debt can hold it as a risk-free asset with a zero-capital charge — a factor widely blamed for magnifying the 2012 eurozone crisis.
“The politicians and the regulators have told us they fixed the banking system and insurance system in terms of this negative spiral of financial sector risk morphing into sovereign risk and [looping] back,” Mr Bäte said. “It is the biggest non-truth that exists.” Mr Draghi told the FT this week that the need for governments to step up their spending was more urgent than before to counter the global slowdown.
The central bank chief added that eurozone member states needed a long-term commitment to fiscal union if the region was to compete more effectively with other global economic powers. The intervention follows an escalating war of words between Mr Draghi and his detractors, particularly senior figures in the German financial establishment. Christian Sewing, the Deutsche Bank chief executive, warned recently that “negative rates ruin the financial system”, and Sabine Lautenschläger, a German member of the ECB’s governing council, resigned last week.
The ECB’s September decision to push interest rates further into negative territory and reignite the quantitative easing programme of bond-buying sparked open criticism by other policy makers, too. In a separate FT interview published earlier this week, Jean Pierre Mustier, the UniCredit chief executive who heads the European Banking Federation, struck a more emollient tone when he urged financiers not to “just complain” and to understand that the benefits of low rates in reducing bad debts outweigh the margin shrinkage that banks have suffered.
But Mr Bäte’s comments reopen hostilities between financiers, particularly those from Germany and other parts of northern Europe, and the ECB. He said financial groups’ supposedly risk-free investments in government bonds — particularly those in southern Europe — were one of his top five worries about global financial stability.
The Allianz boss warned that the general public would not accept another financial crash. “I think I’m going to get very loud now because in the next financial crisis the public will say: ‘What is it with the financial sector? We’re really going to make these people utilities. They are not allowed to do anything anymore.’”