Reuters International

German Chancellor Angela Merkel reads a paper during the weekly cabinet meeting at the Chancellery in Berlin, Germany, April 13, 2016. REUTERS/Hannibal Hanschke

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By Paul Carrel

BERLIN (Reuters) - German Chancellor Angela Merkel weighed into a debate about the European Central Bank's low interest rate policy on Wednesday, pressing Europe's governments to do more to generate growth that she said would help push up inflation.

The ECB has faced intense criticism from German politicians, who have complained the ECB's ultra-low rates are creating a "gaping hole" in savers' finances and pensioners' retirement plans as returns have dropped.

The chorus of complaints prompted France's finance minister to urge Germany on Wednesday to respect the ECB's independence. Merkel followed up by arguing Europe's politicians could themselves help lift inflation by doing more to support growth.

"What politicians can do is to provide for more growth again in Europe, and not just in Germany but in all of Europe, and from this growth to get into a situation in which the inflation rate is higher again," she told reporters.

By shifting the focus to politicians, Merkel could help take the heat out of the debate about the central bank's policies and shift attention towards government measures to foster growth.

The ECB targets inflation of close to 2 percent over the medium-term but it is running at just below zero. To pick up price pressures, the central bank has cut interest rates to record lows and expanded its asset purchases.

In an interview with Reuters published on Tuesday, Finance Minister Wolfgang Schaeuble said the ECB's low rates were causing "extraordinary problems" for German banks and pensioners and risked undermining voters' support for European integration.

He suggested the ECB's low rates risked fuelling the rise of euroscepticism in Germany, where voters flocked to the right-wing Alternative for Germany in state elections last month.

But Merkel sought to refocus the debate, noting the ECB had a mandate to bring inflation to a certain level, and adding: "In this respect, our task is to generate growth and jobs."

A storm of protest erupted in thrifty Germany after Draghi last month described the idea of so-called helicopter money - sending money directly to citizens - as a "very interesting", if unexamined, concept.

Schaeuble, who said he stays in close contact with Draghi, told Reuters he would be amazed if the central bank was seriously considering such a policy.

(Reporting by Paul Carrel; Editing by Michael Nienaber and Ralph Boulton)

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