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GERMAN CENTRAL BANK chief Jens Weidmann criticised as dangerous any plan by the European Central Bank (ECB) to buy member states’ bonds, according to the latest edition of Spiegel news weekly.
In early August, the ECB suggested it could start unlimited buying of stricken member states’ bonds to drive down their crippling borrowing costs, following trouble in Spain and Italy.
The ECB “may undertake outright open market operations of a size adequate to reach its objective,” its chief Mario Draghi said.
“For me such a policy comes close to financing states with the printing press,” Weidmann told the magazine. “In a democracy, it should be the parliaments and not the central banks that decide such a sharing of risks.”
“The manna from central banks will forever sharpen greed,” the Bundesbank chief said. “One should not underestimate the danger that financing by central banks can get one hooked like a drug.”
The German finance ministry also has concerns about any buying of states’ bonds by the ECB, which it fears could compromise the Frankfurt-based bank’s independence, Der Spiegel also reported.
The magazine noted “fierce arguments” within the ECB itself over the form of the programme between representatives of countries such as Spain or Italy and those from northern Europe who think it should be used only in “extreme situations”.
RTE reported today that German Prime Minister Angela Merkel praised the bank chief for speaking out about his doubts and said the strong influence of the Bundesbank within the ECB was positive.
Draghi is due to say more about new measures to fight the sovereign debt crisis on September 6, during his monthly press conference in Frankfurt, which follows a meeting of ECB governors and a decision on key interest rates.
The ECB already has an instrument to buy bonds of member states on the secondary market, where they change hands once they have been issued, but it has not been used for several months.
Additional reporting by Michelle Hennessy.
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So, german prime minister praises german bank chief for voicing concerns about ECB acting to stabilise weaker nations whose instability have weakened the Euro and turned germany into an economic superpower able to order europe around.
What a scoop!
Somebody in the whole set up is an idiot.there are polar opposite views on the issue and both cannot be correct.I think he may be right on this issue whether we we like it or not
Is it not that Germany has best managed its economy and naturally does not wish to be dragged under by countries that will not face down national vested interests.
Germany has benefited disproportionally from EU financial rules since reunification.
Quotes about money
http://dewoody.net/money/quotes.html
He’s completely right, we’re taking our pain to get out house in order, but the Italians and Spanish and on the side the French are trying to use the printing presses to get them out of their bind, a path which in the medium run will hurt us all. This is being done because the political leaders won’t make tough decisions, to be honest any real decisions on the future of the euro.
It baffles me how many idiots seem to be in positions of power these days, did they win these jobs in a lotto style draw or something because one seems to be a bigger jackass than the other…….is it any wonder the EU is so badly screwed!
Any chance you could explain how Dr. Weidmann is actually an idiot? He seems to me like quite an intelligent man. You (or I) may not agree with him, but to call into question the intelligence of people who hold a different view to you is a pretty pathetic way of arguing.
Dr. Weidmann does a good job of explaining this himself.
He’s right.
Well Pierce…..when the patient is as sick as Europe…somebody had better start administrating some kind of drug. The same could be said of austerity from a German point of view…looking in at them, they just can’t seem to get enough of it.
How is he right? He wants hardship imposed on the Irish people. Every central bank prints money.
There is some seriously flawed financial thinking going on in the EU these days. First, countries and the EU itself are borrowing money at a higher interest rate than the interest rates their charging countries such as Greece, Spain and Italy. Now they want to buy up worthless junk bonds in order to manipulate the interest rates.
It’s like using a 20%-30% interest credit card to pay off the debt owed on a 7%-12% credit card. You’re just digging yourself a deeper hole that’ll take you far longer to get out of.
Pity we cannot ask Herr Weidmann about his thoughts on the letter the ECB sent to Brian Lenihan which forced Ireland to accept the bail out conditions including paying back every cent to the bond holders?
Does that action fit into his picture of democracy?
If we’re not allowed to see the letter, how do you know that the bail-out was forced? Would you really take Lenihan’s and Cowen’s word that there was no other way on offer? Maybe there were other alternatives put forward by the ECB, but they weren’t to the then-government’s liking. Until we can see the documents ourselves, it mightn’t be the wisest thing to take as fact what has come from sources that lack credibility and are far from disinterested.
Noonan has not disagreed with what has been reported about the contents of the letter. Though he has refused to publish it at this time just saying that he will forward it to what ever committee investigates the bank bailout issue. So I’m not taking the word of Lenihan or Cowen. Do you not think he (Noonan) would not have published it by this stage if it would make the opposition look like fools?
I think that those involved who were “forced” to take the bail-out may not have been forced. They may instead have willingly chosen an option that put the Irish people under an undue level of suffering ( let’s face it, there was no option that wouldn’t have brought suffering ) but that protected the interests of a few. Like most things in this country, I’d guess that such a deal would go beyond party borders, and so people from all parties will have to face up to some unpleasant truths if an when the documents are released. I do think Noonan is being sincere when he says he would like the correspondence to be released to the public, but the pressure to keep it under wraps mightn’t just be coming from the old FF/Lab, it might also be coming from his own parties. We’re we screws by this deal? Yes. Was it Germany/France/ the ECB who screwed us? On that I am far less convinced. I think the perpetrators are far closer to home and all this ( mostly-successful ) demonisation of “callous foreigners” is simply an exercise in passing the buck.
JTHM: could it not be both the home grown clowns and the ECB? (as seems likely)
Could well be. But, if the infamous letters show that the Irish government had had their hands forced, they’d have been waving copies of these letters from day one. Something stinks and, to be honest, My experience with Germans has taught me that they are very direct. If they planned to screw Ireland, they’d have no problem saying so. And, more to the point, it’s not the ECB’s job to protect Irish citizens, that’s the job of the elected Irish government. So I’m firmly on the side of blaming the Irish government, and not any outside body, for this mess. Blaming outside organisations reeks too much of “blame Canada” for me.
I totally agree. They made the previous government guarantee the bond holders to prevent the “spread of contagion”. Our banks were stupid to lend the money they did. Their banks stupidly lent to our banks. If our banks went down, theirs would have suffered big time. So they loaned us money, we take the pain to protect their banks. The old saying “If a company owes you money, you are a creditor. If it owes you more than it is worth, you are the owner.” Should have handed AIB to the Germans.
Have to agree. Private banks shouldn’t be given so much control.
Every central bank prints money. Otherwise, the ordinary people have to face gross hardship and poverty. The ECB needs to monetize the debt of Ireland, Spain, Italy asap… Our borrowing costs need lowering.
have your say