October 26, 2018 / 2:21 PM / 22 days ago

ECB's Draghi defends his independence amid attacks from Italy

BRUSSELS/ROME (Reuters) - The head of the European Central Bank, Mario Draghi, defended his independence on Friday as members of the Italian ruling coalition attacked him over “improper” remarks about the country’s political situation.

FILE PHOTO - European Central Bank (ECB) President Mario Draghi attends the news conference following the governing council's interest rate decision at the ECB headquarters in Frankfurt, Germany, September 13, 2018. REUTERS/Kai Pfaffenbach

The Italian government is facing a backlash from the European Commission over its plans to increase spending, in a standoff that has even stoked some fears Italy might leave the euro area.

Draghi, himself an Italian, did not mention Italy in a speech in Brussels in which he made the case for central banks being independent from governments if inflation is to remain under control.

“The central bank should not be subject to fiscal or political dominance and should be free to choose the instruments that are most appropriate to deliver its mandate,” Draghi said.

Italy’s Deputy Prime Minister Luigi Di Maio was one of several politicians in the country’s ruling coalition, formed by the far-right League party and the anti-establishment 5-Star Movement, to attack Draghi on Friday.

Di Maio, the head of the 5-Star Movement, said Draghi had been “poisoning the atmosphere” with his call on Italy to tone down its fight with Brussels and stop questioning the “existential framework” of the euro.

Earlier, a prominent League lawmaker and eurosceptic academic, Alberto Bagnai, said the government had no intention of leaving the single currency and it had been “improper” for Draghi to “sound the alarm” on Italian banks.

Fellow League parliamentarian Claudio Borghi, also a long-standing proponent of a return to the lira, weighed in by saying Draghi’s news conference on Thursday signaled “that some people want to create confusion in the markets”.

Draghi had said on Thursday that a recent sell-off in Italian government bonds was set to dent the capital of Italy’s banks, which own about 375 billion euros ($426.3 billion) worth of that paper.

The ECB has been barred from financing governments since the launch of the euro, partly due to German fears that it could end up bankrolling indebted governments in the south of the bloc.

Sources told Reuters earlier that European Union and Italian officials discussed this week the health of Italian banks, including Banca Monte dei Paschi di Siena (MPS) (BMPS.MI).

Reporting by Giselda Vagnoni in Rome and Balazs Koranyi in Brussels; Writing by Francesco Canepa in Frankfurt; Editing by Crispian Balmer and Hugh Lawson

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