Franco-German row breaks out over ECB’s role

City A.M. Reporter
GERMANY has rebuffed French President Nicolas Sarkozy’s call for a debate on the European Central Bank’s (ECB) role in promoting growth yesterday, reaffirming its attachment to ECB independence.

Sarkozy told some 100,000 supporters on Sunday that Europe needed to rethink the ECB’s role in supporting economic activity.

“If the ECB does not support growth, we will not have enough growth,” he said.

“It’s our duty to reflect on this issue. We cannot have taboo subjects.”

His socialist rival Francois Hollande, who is leading in opinion polls, called in his manifesto for the ECB’s mandate to be revised to add a responsibility for promoting growth, while radical presidential candidates have said the central bank should be allowed to lend directly to governments.

German government spokesman Steffen Seibert, asked about Sarkozy’s comment, told a regular news briefing in Berlin: “It is the core belief of the federal government ... that the role and office of the ECB be independent of encouragement and assistance from politics. And that’s well known in Paris.”

French analysts brushed off the president's remark as campaign rhetoric designed to attract nationalist Eurosceptic voters, as he had done during the 2007 election race.

“After the election it will be one of the issues that deserves to be dealt with, even if for now it’s premature to talk about what kind of format the talks could take,” said Jean-Francois Cope, from Sarkozy’s UMP part.

“We could bring up the role of the ECB with our European partners after the election, for sure.”

Politicians have long sought to score points with voters by suggesting the ECB’s mandate should be extended to bring it more in line with that of the US Federal Reserve, which has a double mission to ensure price stability and full employment.

Some economists also argue the ECB’s single mandate is a hindrance to the Eurozone’s ability to resolve its debt crisis.

Berlin steadfastly opposes any extension of the ECB’s role however, and sees capping inflation as the best way to promote growth by keeping down medium and long-term interest rates.