The Guardian view on eurozone populism: fight it with fiscal firepower | Editorial

The nationalism that taps into people's angst and dislocation can be effectively challenged with a bazooka of a eurozone budget

Last month Germany's version of the Sun, Bild, ran a sensationalist attack on the outgoing president of the European Central Bank, Mario Draghi. Depicting the central banker as "Count Draghila", replete with vampirish teeth and velvet collar, the article portrayed the ECB boss as a fiend sucking the bank accounts of German savers dry of billions of euros with low interest rates. A day later the tabloid interviewed the head of the German central bank to ram the message home under the headline "Is our money in danger?". There is an undoubted perception across Europe's largest economy that the ECB was penalising savers through easy money policies that have given populists a stick to beat mainstream politicians with. However, the release of the latest economic data shows that Mr Draghi was right and German sentiment was wrong.

It is increasingly clear the risk of recession in Europe is rising. Growth is sputtering while inflation is falling. The eurozone manufacturing sector suffered its worst month in seven years while inflation dropped to a three-year low. Mr Draghi has for years attempted to resuscitate the eurozone's sluggish economy through monetary means. Last month the ECB lowered interest rates further into negative territory and restarted the ECB programme of buying bonds. Yet as one economist perceptively put it, the problem for the eurozone is that "weak credit growth is driven by the lack of demand from creditworthy borrowers rather than the supply cost of finance". This can be solved in part by governments stepping up to boost demand in the eurozone. Mr Draghi is right to say it is no longer tenable to claim that monetary policy alone can deal with the entrenched problems of the continental economy. Instead he correctly called for fiscal policy to become the main economic instrument to sustain demand in the eurozone.