ECB faces backlash over green strategy ‘distraction’ from fighting inflation

European Central Bank President 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, Feb 14 (Reuters) – European Central Bank President Christine Lagarde faced a backlash in the European Parliament on Monday from conservative lawmakers criticizing the ECB’s green strategy as a “distraction” to her duty to control inflation.

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

But ahead of the vote on the ECB’s annual report on Tuesday, European People’s Party lawmakers objected to what they saw as a foray into policy beyond the ECB’s remit, particularly when inflation is high.

The ECB is independent of parliament, but objections from lawmakers could weigh on an already sluggish debate over the climate role of the eurozone central bank and bolster the reservations of some conservative rate regulators.

“The main mandate of the ECB is to ensure price stability, which the ECB is not doing a great job at the moment,” German lawmaker Markus Ferber said in a statement emailed to Reuters. “Anything else, like ‘going green’, is simply a distraction from achieving that core mandate.”

In his address to Parliament’s plenary on Monday, Lagarde said the ECB’s “climate change action plan” was on track.

This includes specifying by the end of the year what information companies will be required to disclose in order for their bonds to be eligible for ECB purchases.

BACK DOOR

But Ferber said such changes were “nothing less than a backdoor extension of the ECB’s mandate” and required changes to EU treaties.

He and his colleague Georgios Kyrtsos tabled several amendments to paragraphs relating to the ECB’s climate strategy in a parliament report put to the vote on Tuesday.

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

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

Ferber said environmental goals should not be pursued through monetary tools and that the ECB would “create distortions” by “purchasing only or mainly green bonds” because that market was still small.

Reporting by Francesco Canepa; Editing by Nick Macfie and Paul Simao

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