ECB faces backlash against green ‘distraction’ from fighting inflation

ECB faces backlash against green 'distraction' from fighting inflation © Reuters. FILE PHOTO: President of European Central Bank, Christine Lagarde, speaks during a news conference following a meeting of the governing council in Frankfurt, Germany, February 3, 2022. Michael Probst/Pool via REUTERS/File Photo

FRANKFURT (Reuters) – European Central Bank President Christine Lagarde faces a backlash in the European Parliament on Monday from conservative lawmakers criticising the ECB’s green strategy as a “distraction” from its duty to tame inflation.

Lagarde has made joining the fight against climate change a key goal and the ECB pledged last year to take greater account of the environment in core policy decisions, such as which bonds to buy in its multi-trillion-euro stimulus programme.

But with Lagarde due to appear in parliament on Monday, lawmakers from the European People’s Party were taking exception to what they saw as a foray into a policy area beyond the ECB’s remit, especially when inflation is running high.

The ECB is independent of parliament but lawmakers’ objections may weigh down an already slow-moving debate on the euro zone central bank’s climate role and strengthen the reservations of some conservative rate setters.

“The ECB’s primary mandate is ensuring price stability, which at the moment the ECB is not doing a great job at,” German lawmaker Markus Ferber said in an emailed statement to Reuters. “Everything else such as the ‘green shift’ is simply a distraction from achieving that primary mandate.”

He and colleague and Georgios Kyrtsos have tabled several amendments to paragraphs relating to the ECB’s climate strategy in a report by the European Parliament up for vote on Tuesday.

In one amendment, they insisted the ECB should stick to “market neutrality”, that is buying bonds in proportion to the outstanding amount. This would implicitly close the door to buying more “green” debt and fewer bonds from highly polluting companies.

“Ferber and Kyrtsos’ attempt to reinstate explicit European Parliament support for the principle of market neutrality would be a major step back in the debate on green monetary policy,” said Alessia Del Vasto, advocacy officer at campaign group Positive Money Europe.

But Ferber said environmental goals should not be pursued via monetary tools and the ECB would “create distortions” by “only or predominantly buying green bonds”, because that market was still small.

An ECB spokeswoman did not immediately offer a comment. Lagarde is due to appear in parliament at 1615 GMT.


Source: Reuters