FRANKFURT, Germany – European Central Bank head Mario Draghi urged skeptical Germans Wednesday to support his efforts to rescue the euro, arguing that "exceptional measures" could be used to restore stability across the 17-country single currency group.
The ECB is hard at work on eagerly awaited plans for a bond-buying program aimed at lowering the borrowing costs of debt-ridden governments, including Spain and Italy. Draghi is expected to say more about the plans at the next ECB rate-setting meeting on Sept. 6.
The plans have sparked a fierce debate in Germany, which is the biggest backer of Europe's financial rescue efforts. The country's national central bank, the Bundesbank, and its head, Jens Weidmann, is against the bond-buying idea, along with many academic economists, conservative politicians and voters. They argue that it puts taxpayer money at risk and breaks the European Union treaty provision barring the ECB from directly backing governments.
Chancellor Angela Merkel has indicated she's open to the ECB's plans and has publicly admonished members of her governing coalition to tone down angry remarks about debt-stricken countries such as Greece. A top German official on the ECB executive board, Joerg Asmussen, has also publicly backed the bond purchase plans.
In an opinion piece for highbrow German weekly Die Zeit, published on Wednesday, Draghi argues that as an exporter deeply integrated into the global and eurozone economies, Germany needs a strong, stable currency across the entire eurozone.
He said the bond purchases could lower interest rates that have been distorted by market panic. It would then be easier to spread the ECB's currently low interest rates better throughout the eurozone. Setting rates for the currency union is its core mission, so purchases are in line with that, he argued.
"When markets are fragmented or influenced by irrational fears, our monetary policy signals do not reach citizens evenly across the euro area," he wrote.
"We have to fix such blockages to ensure a single monetary policy and therefore price stability for all euro area citizens. This may at times require exceptional measures."
Draghi also argued that that the euro's original 1999 setup — one currency shared by countries that only loosely coordinate their spending and economies — has been made obsolete by the debt crisis that has seen Greece, Ireland and Portugal run up heavy debts and need bailout loans from the other countries.
However, fixes were within reach, he said, that shouldn't mean that Germany will always have to pay for less well-managed countries' troubles. European officials can take less drastic steps, such as establishing stricter central oversight of national spending and tougher scrutiny of banks.
He advocated a calm discussion of the "minimum requirements" to complete the monetary union, including more central EU control over spending by individual countries and tougher scrutiny of problem banks.
"We need true oversight over national budgets," he said. "The consequences of misguided fiscal policies in a monetary union are too severe to remain self-policed."
Robert Lynch of HSBC Global Research said "the Draghi letter will not necessarily see those elements of resistance in Germany drop their opposition."
The letter nonetheless "highlights the determination of the central bank to push forward with its plans to put in place the mechanism to intervene more aggressively on eurozone bond markets, and that plan has been a stabilizing force for the euro since it was first hinted at a month ago."