Draghi Defends ECB Crisis Measures

European Central Bank head Mario Draghi has again defended the ECB’s bond-buying program, saying the crisis backstop was more important now following recent market turbulence sparked by other central banks around the world.

Draghi said Tuesday in a speech in Berlin that the offer to buy bonds issued by indebted countries “is even more essential now as we see potential changes in the monetary policy stance, with associated uncertainty, in other jurisdictions of the global economy.”

The U.S. Federal has roiled markets by indicating it could taper off its emergency stimulus measures next year. The Fed has been buying longer-term bonds in the open market, which drove down long-term interest rates and sent stocks and bonds higher. Chinese authorities have tried to reign in excessive lending, leading to a spike last week in interbank borrowing rates. Japan has also said it will add large monetary stimulus. Draghi did not mention any central bank by name.

The ECB hasn’t bought any bonds since announcing its plan last year. But the mere offer has pushed up government bond prices and taken financial pressure off indebted governments by lowering their borrowing costs. The bond-buying help would only be available to countries that sign a bailout agreement with the eurozone’s financial rescue fund and promise in writing to take steps to reduce their debts and deficits.

Germany, where Draghi was speaking Tuesday, is home to some of the ECB president’s biggest critics. Skepticism toward rescue measures for indebted countries is widespread among Germans, who would be the biggest financial backer of any bailout because of the size of their economy. The ECB bond-buying plan is currently being challenged in Germany’s Federal Constitutional Court and was also opposed by Germany’s central bank.

Bundesbank head Jens Weidmann says such purchases would risk distributing any losses on purchased bonds to taxpayers in other countries. He has also said they could take pressure of governments to take tough steps to reform their economies and finances.

However the support of Chancellor Angela Merkel and the votes of the other members of the ECB governing council left Weidmann as a minority voice. Draghi was speaking at an event organized by a group linked to Merkel’s conservative party, the Christian Democratic Union

Draghi on Tuesday rejected the argument that the program would transfer risk of loss from indebted countries to better off ones, “over and beyond risks that are inevitable and inherent” in running one monetary policy for 17 countries.

He stressed that troubled countries could not get help from the bond purchase without committing to reforms. Because of the program, “the euro area is a more stable and resilient place to invest in than it was a year ago.”

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