isabel schnabel : sonntagszeitung interview in frankfurter allgemeine interview with ms isabel schnabel, member of the executive board of the european central bank, in frankfurter allgemeine sonntagszeitung, conducted by mr patrick bernau and mr dennis kremer and published on 21 march 2020. * * * ms schnabel, never before has the ecb provided so much money for asset purchases in such a short period of time. is this crisis worse than anything we ’ ve seen before? it ’ s an extraordinary crisis. it ’ s not just europe that is affected, it ’ s the whole world. and in addition to the health problems and the human suffering, we ’ re also experiencing a severe economic shock that is being compounded by the protective measures taken. our new asset purchase programme, which has been put in place specifically for this pandemic emergency, aims to address the particular nature of the situation we are facing. where do you see the biggest problems? the crisis is affecting supply and demand at the same time. initially, the focus was mainly on disrupted supply chains. now the protective measures taken are also hampering production in many companies. and demand is falling too – if people don ’ t know what the future will bring, they hold on to their money, especially since many activities have been curtailed. companies are investing less. and all that means that we are already facing a massive shock ; we need to make sure that it doesn ’ t get even worse. if the ecb buys sovereign bonds, governments will be able to borrow money more easily and pass it on to firms. is that still in line with your mandate? our actions are always determined by our mandate of price stability. and for this we need a functioning transmission mechanism so that monetary policy is passed on to the real economy. that mechanism had recently become impaired, as manifested by the sudden rise in euro area government bond yields. it was affecting all euro area countries, even germany. when that happens, monetary policy has to step in. so it ’ s not a rescue plan for italy? no, of course not. and italy has not lost its market access. the concern was rather that we could start to see self - reinforcing price spirals … … meaning that investors start selling, government bonds fall in value, and so even more investors have to sell … … which can always happen in times of crisis, especially

when capital is seeking safe havens. the central bank must act to counter such effects when the transmission of monetary policy to the real economy is at risk. one week ago, ecb president christine lagarde said that the ecb isn ’ t responsible for closing risk premia on government bonds. did that create additional uncertainty? the markets were questioning whether the ecb continued to stand ready to do everything necessary to stabilise the situation. but that was never in any doubt. and then the situation in the markets deteriorated rapidly, so we had to take further action. are there any rules at all now for such asset purchases, or does the ecb just do what it 1 / 3 bis central bankers'speeches likes? our purchase programmes are rules - based. we continue in principle to buy bonds in line with the capital share of each country. but we need more flexibility now, over time as well as across countries and asset classes, in order to tackle the situation appropriately. would you have liked to go into this crisis with higher interest rates, so that you could cut rates now? interest rates have been set appropriately also in recent years. higher interest rates were not an option – otherwise we wouldn ’ t have been able to fulfil our price stability mandate and we would have damaged the economy. i know very few economists who are of a different view. some people are already calling for signals to hike interest rates once the crisis is over. your newspaper featured a guest commentary last week on the subject. in view of the current situation, that article seems a little out of place. we are looking at what might well be one of the worst economic crises of all time. it seems inappropriate to be talking about raising interest rates now. the authors of that piece were talking about the period after the crisis. we should talk about what happens after the crisis at a later date. for now we need to concentrate on mitigating the effects of this crisis. yes, but one does get the impression that every crisis sees the introduction of new measures which then can ’ t really be unwound afterwards, and then central banks have to come up with something bigger and better in the next crisis. is that the right way forward? the new package is proportionate to the situation. it will only run until we have overcome this crisis. your question also seems to suggest that we need to return to the former style of monetary policy, that is before the ecb began to purchase bonds. but that