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BERLIN (Reuters) - European Central Bank Chief Mario Draghi backed a proposal by German Finance Minister Wolfgang Schaeuble to radically expand the powers of the European Union's monetary affairs commissioner giving Brussels greater control over member states budgets.
In an interview with German magazine Der Spiegel published four days after defending his bond-purchase programme in the country's lower house of parliament, Draghi also said he did not expect his Outright Monetary Transactions (OMT) plan to cost the taxpayer money.
Schaeuble said earlier this month that the EU needed a commissioner who wielded power over member states' budgets together with reform of the European Parliament's decision-making process, changes he said could help ease the debt crisis.
The commissioner, an expansion of the current monetary and economic affairs commissioner, should have the authority to veto budgets if they broke deficit rules, he argued, urging far-reaching reform and greater European integration.
Draghi's public support for the proposals is a boost for Schaeuble's plan but such reform would require changes to EU treaties, something that would need Britain - which has been sceptical of greater European integration - to acquiesce to unless a separate euro zone treaty is drawn up.
"I explicitly support this proposal," Draghi told Der Spiegel magazine published on Sunday.
"I am certain: if we want to re-establish trust in the euro zone, countries must pass a part of their sovereignty to the European level," Draghi said.
Schaeuble wants the role of the economic and monetary affairs commissioner, dubbed the "currency commissioner" in Germany, to be modelled along the lines of the EU's competition commissioner, the only commissioner who can make legally-binding decisions. His plan has received a mixed welcome.
Addressing fears that the ECB's decision to buy an unlimited amount of debt from struggling member states could lead to inflation and cost taxpayers money, Draghi said.
"To the contrary: so far we have even made profits from our bond purchases, which then went to national central banks," Draghi said, and added this would remain the case of governments in southern Europe continued their reforms of recent months.
"One thing is clear: if the governments in southern Europe continue with the successful implementation of policy reforms seen in the last few months, German taxpayers will make a profit from our purchases. There is no better protection against the euro crisis than successful structural reforms in southern Europe."
Draghi defended his bond-buying plan in front of Bundestag members on Wednesday, telling sceptical German lawmakers that fears of illegal government funding or higher inflation were misplaced.
The German central bank, the Bundesbank, has denounced his OMT plan as tantamount to printing money to finance governments.
It was adapted from the ECB's discontinued bond-purchasing programme, the Securities Markets Programme, to stop governments from reneging on promises to implement reforms.
Draghi said he wished disagreements with Bundesbank chief Jens Weidmann - such as over the OMT plan - could be handled more privately.
"I would like some discussions to take place in a more controlled fashion," Draghi said, saying he and Weidmann understood each other well. "We have the same goal, our differences of opinion on the right methods are not un-bridgeable."
(Reporting by Annika Breidthardt; Editing by Andrew Osborn and Mike Nesbit)