Bundesbank chief opposed to new bailout for Ireland
Outgoing chief Weber says worst is still to come for indebted nations
OUTGOING Bundesbank chief Axel Weber renewed his opposition to further bailouts for Ireland and Greece in an article in yesterday's 'Financial Times'.
Mr Weber, who said earlier this month that he was leaving the German central bank despite being widely tipped as the next head of the European Central Bank, said the latest proposals to help indebted states would amount to "eurobonds more or less through the back door" and stop investors from taking responsibility for their own actions.
Comments such as these are likely to influence the outcome of a court case to be heard in Germany's supreme court this year about the constitutionality of any further bailouts.
Mr Weber said it was a "danger" to reduce the interest rates being charged to Ireland and Greece. Both Fine Gael and Labour have said repeatedly that they will make Europe reduce the interest rates charged on the bailout agreed last December. Fianna Fail, which negotiated the blended 5.8pc rate, has said that the rate cannot be changed although it can fluctuate as currency markets and interest rates move.
Mr Weber also rejected the idea of buying the bonds of debt-stricken states such as Ireland, saying "such purchases would run into significant operational governance problems regarding their volume, timing and conditions".
The comments came a day after Mr Weber implied that the worst was yet to come for Ireland and other indebted nations.
"Compared with a marathon, problem countries have maybe managed the first 15km," said Mr Weber in a speech in Dusseldorf. "Given my experience on this track, I can tell you that the most painful passage will come at a later point."
Yields on peripheral eurozone bonds rose yesterday morning, but it was more a reflection of unrest across North Africa, which prompted investors to seek safer assets such as German bonds, traders said. Yields were little changed by the close of trading in Europe.
While Mr Weber's comments cannot be seen as good for Ireland, Spanish Prime Minister Jose Luis Rodriguez Zapatero said yesterday that he was confident Germany would support a stronger eurozone fund despite Chancellor Angela Merkel's domestic problems. "We are winning the battle, but I still have my guard up because we have to implement all the reforms that have generated more confidence," Mr Zapatero he said.
As speculation mounts that Portugal, but not Spain, will be forced to follow in Ireland's footsteps and seek a bailout, Portuguese Finance Minister Fernando Teixeira dos Santos told Japan's Nikkei newspaper during a visit to Tokyo he believed the country would continue to be able to fund itself in the markets without seeking eurozone aid.
"Portugal is tackling fiscal rebuilding to achieve its fiscal reform targets. The situation is different from Greece and Ireland," he was quoted as telling Japanese officials.
Portugal has around €4.3bn of bonds falling due in April and another €4.9bn in June. A portion of that debt may be sold in private placements in Asia, with both China and Japan having indicated that they could buy eurozone bonds.