jens weidmann fears that the ecb ’ s monetary policy is financing fiscal deficits. draghi : no, the governing council disagreed with that view. what has been decided is a monetary policy measure. there is a fundamental difference between buying on the primary market, which is forbidden because the money would go to the government, and buying on the secondary market where the money does not go to the government but to bond holders. article 18 of the statute states that the ecb may “ buy and sell [ … ] marketable instruments ” as part of its mandate, if necessary to achieve price stability, of course always respecting the treaty ’ s article 123 on the prohibition of monetary financing. sz : where does the german opposition come from? draghi : it comes from the history of the country and the fear of inflation. but it has to be clear that in the case of efsf / esm support, the parliaments of the euro area countries will be involved. sz : but the parliaments do not decide on the amounts that the ecb is going to risk … draghi : no, because monetary policy has to remain independent, and it is a prerequisite for the governing council to consider the specific monetary policy measures. sz : many germans were against the euro, because they had doubts about the economic policies of countries like greece or italy. now they feel that they were right. draghi : the euro has delivered price stability to an entire continent. it has removed exchange rate risk, fostered economic cohesion, employment and growth. germany has benefited greatly from all these accomplishments, as well as from price stability that is greater than in the years before the euro. sz : the ecb will be getting even more power by supervising the european banking industry. so, will the ecb always bail out ailing banks by printing money? draghi : no, we have to organise ourselves and keep banking supervision and monetary policy strictly separate. this has been done in many central banks. we are not mixing anything ; fundamentally, there will be a chinese wall. sz : chinese walls in regular banks have collapsed. draghi : not in central banks. sz : how can the ecb do a better job than the german bafin? draghi : it is not about doing a better job ; it is about making sure that uniform supervisory practices are applied across the whole single currency area. the more detached you are from national government, the more objective you

meet are the best insurance against risk. the risks are well managed. and, in our assessment, doing nothing poses even greater risks. sz : if a country defaults on its bonds, the ecb and thus the tax payers lose a lot of money. draghi : this is why conditionality is so important. moreover, the outright monetary transactions will focus only on the shorter term, in particular on bonds with a maturity of one to three years. sz : but 42 % of the german population distrust you as the ecb ’ s president. draghi : that is a hindrance for our work. i will have to do more to explain our actions. we will start with this interview. but you always have to weigh the options. sz : which are? bis central bankers ’ speeches draghi : of course, you could say “ nein zu allem ”, but that is not constructive. for example, if we had not decided to conduct the longer - term refinancing operations ( ltros ), we would have seen a severe credit crunch across large parts of the euro area. under such conditions, and i have said this time and again, we would not be able to deliver what everybody expects us to deliver : price stability over the medium term. so, we have to help avoid such conditions. sz : how serious is your threat? it is hard to believe that you would stop buying bonds and let spain or italy plunge into disaster. draghi : if a given country does not comply with conditionality, the ecb cannot improve the monetary policy transmission in that country. any attempt to do so in such a situation would be ineffective because it would be offset by the country ’ s policy failure. sz : why didn ’ t you make it mandatory that esm / efsf first buy bonds on the primary market before the ecb steps in? draghi : the key for us is strict conditionality and effective monitoring. the possibility of primary market purchases by the efsf / esm should be sufficient to ensure that. sz : can the euro area now be saved after the ruling of the german constitutional court on the esm? draghi : the esm is an important measure in the crisis management toolbox. however, coping with the crisis does not depend only on having a stabilisation mechanism in place ; in particular, we need determined actions at the level of individual member states. and, collectively, member states