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E.C.B. Bond-Buying Program Is ‘Pointing in the Right Direction,’ Draghi Says

FRANKFURT — The president of the European Central Bank defended its fledgling asset purchase program before a skeptical audience on Wednesday, saying the benefits were filtering down to consumers and businesses while protecting the rest of the eurozone from the political turmoil in Greece.

“Developments are pointing in the right direction,” the bank president, Mario Draghi, said at a conference of economists and analysts who specialize in monetary policy. Mr. Draghi noted that the eurozone unemployment rate, while still 11.2 percent, was at its lowest level since 2012.

In addition, he said, borrowing costs for eurozone governments have fallen since the European Central Bank began signaling last year that it was likely to begin buying government bonds to stimulate growth and push inflation from dangerously low levels.

The central bank began buying government bonds on Monday, purchasing 3.2 billion euros, or about $3.4 billion, worth on the first day. The initial size of the purchases suggested the bank would be able to reach its goal of buying €60 billion of government debt and other assets per month.

A recent decline in interest rates for Portugal and other countries occurred “in spite of the renewed Greek crisis,” Mr. Draghi said. “This suggests that the asset purchase program may be shielding other euro-area countries from contagion.”

As the central bank snapped up sovereign debt, interest rates on the bonds continued to drop on Wednesday, with Germany’s 10-year yield tumbling to a low of 0.213 percent and the yield in Portugal falling to a low of 1.674 percent. The bank’s printing of euros to buy the bonds helped push the currency down to a 12-year low against the dollar, trading in late morning at $1.057.

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Mario Draghi, the president of the European Central Bank, predicted that downward pressure on inflation should ease by the end of the year.Credit...Arneâ Dedert/European Pressphoto Agency

Mr. Draghi also predicted that downward pressure on inflation, which has fallen into negative territory, should ease by the end of the year. “On average, the latest news is positive,” Mr. Draghi said.

The conference at Goethe University in Frankfurt drew an especially critical audience. Germany is the center of opposition to the European Central Bank’s policies, and Mr. Draghi was followed by Otmar Issing, former chief economist of the central bank and a leader among those who believe the purchases will create asset bubbles and give countries like Greece or Italy an excuse to delay necessary overhauls to their economies.

“There is strong disagreement over what we can expect from this new measure,” Mr. Issing said.

At the event, Volker Wieland, a member of the German Council of Economic Experts, which advises the government on economic policy, said the new left-wing government in Greece has already provided evidence of how central bank stimulus is encouraging complacency among political leaders.

By pushing down market interest rates on government debt, the asset purchases have reduced pressure on governments to control spending, critics say.

The European Central Bank has “given government room to delay reform,” Mr. Wieland said. “The government in Greece has done its best to destroy investment opportunities. There were first signs of hope that have been destroyed.”

Mr. Draghi left at the end of his speech and did not hear Mr. Wieland or Mr. Issing speak. However, he anticipated the criticism.

“The beneficial impact of our asset purchases on financing conditions, rather than reducing the incentives for reforms, will actually increase the benefits of such reforms,” Mr. Draghi said during his speech. “Firms will be encouraged to increase investment, bringing forward the economic recovery. Effective, price-stability oriented monetary policy and structural reforms work hand in hand.”

A correction was made on 
March 11, 2015

Because of an editing error, an earlier version of this article misstated a currency. The euro was trading in late morning at $1.057, not €1.057.

How we handle corrections

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