Draghi defends monetary policy after criticism from Germany

European Central Bank President Mario Draghi on Thursday hit back at criticism from German politicians over the Governing Council’s monetary policy.

German officials have accused the ECB of hurting the nation's economy after introducing a comprehensive package of measures in March, which included a surprise cut to interest rates by five basis points to 0.00% and increased asset purchases by €20bn to €80bn per month. The action was taken amid pressure to address prolonged low inflation, a stagnant Eurozone recovery and risks stemming from a slowdown in emerging economies.

The ECB, which left its policy unchanged on Thursday, was forced to defend its stance after German Finance Minister Wolfgang Schaeuble said low interest rates for a long period of time was "not reasonable” and that the central bank’s measures were causing “extraordinary problems” for Europe’s biggest economy.

Schaeuble said Germans were concerned that low interest rates were hurting savers' finances and pensioners’ plans.

Speaking at a press conference after announcing the ECB’s latest policy announcement, Draghi responded to the claims.

“We have a mandate to pursue price stability for the whole of the Eurozone not only for Germany," he said.

"We obey the law, not the politicians, because we are independent."

The president said the US had kept interest rates low for longer than Europe without the same problems.

He urged patience on monetary policy having its effect on helping to turn to the economy around. The ECB expects inflation to turn negative again in coming months before picking up in the second half of 2016 and recovering in 2017.

Draghi also reiterated the need for structural reforms that included growth-friendly government policies, lower taxes, cuts to public expenditure and more investment.

A reporter at the conference asked Draghi whether he was worried that companies would stop investing due to the flow of criticism from Germany.

“A polite, lively debate may even be welcome, to help shape our policies,” Draghi said.

“But criticisms of a certain type could be seen as endangering the independence of the ECB. Therefore, that can cause delays in investment, delays in taking risks.

"But we are independent, so we will continue with our policies. But the recovery will take longer if our independence is endangered."

On Britain’s upcoming 23 June referendum on European Union membership, Draghi said he wouldn’t speculate on the outcome of the vote.

He said the Governing Council believes there is only “limited” risk that it might hurt the Eurozone's recovery. However, Draghi admitted that concerns about a possible Brexit had already had some significant consequences for the market, including the decline in the value of the sterling.

The ECB’s decision to hold interest rates at 0.0%, the deposit facility rate at -0.40% and the marginal lending facility rate at 0.25% was expected by economists.