Because of its policy of negative interest rates, the European Central Bank has angered bankers. It now looks as if some governments in the eurozone are also unhappy.
The ECB's chief, Christine Lagarde, would be wise to keep calm and keep going. Her bank is supposed to be independent of political interference and its sole purpose must be to fulfill its mandate to maintain price stability.
Governments have themselves to be the ones accountable for forcing the Frankfurt institution to initiate such drastic measures: had they utilized fiscal policy more broadly, the ECB would require less unorthodox measures.
Not happy
The central bank pays the excess reserves banks store in their deposit facility with a 0.5 percent payment. According to a study from Bloomberg News, many states, including Belgium and the Netherlands, have protested about this strategy.
The ECB is worried that negative rates are affecting savers more and more and might have a detrimental effect on savings. Generally, its officials worry about the risks posed by sub-zero levels to the euro area's financial stability.
Many bankers in Europe and the U.S. have raised concerns about the impact on their profitability of negative rates: as interest rates fall, the spread between loan and deposit rates is becoming ever tighter.
Another price is the negative rate of excess reserves deposited with the ECB. Banks have begun to push sub-zero rates on to their corporate customers and affluent consumers, but so far they have opted to take a financial hit instead of paying smaller savers (although this may change).
Accountability
The ECB will politely tell governments to take their own company into account. That's what independence is about for a start. Politicians have protected central bankers so that even when they are electorally unpalatable, they will make decisions that are good for the economy.
More broadly, Northern European countries were central bank independence's greatest champions. Strangely, they are now the ones exerting efforts to charge the ECB.
Third, there is no proof that the eurozone economy is being affected by negative rates. The inflation rate in the single currency area is just 1 percent, well below the target of the central bank, but below the 2 percent mark.
The ECB is right to do everything it can to help inflation return to its goal. While savers may feel the pinch, lenders enjoy very low rates and there are more opportunities for productive investment.
