Thursday 25 August 2016

Draghi's proposals to buy bonds gets Merkel's backing

Published 07/08/2012 | 05:00

Germany's statement is sign that it is softening stance on ECB intervention

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GERMAN Chancellor Angela Merkel's government has backed European Central Bank president Mario Draghi's proposals on bond buying to help bring down borrowing costs in Spain and Italy.

The government is "not worried" by Mr Draghi's comments last week about buying bonds, a spokesman said yesterday when asked whether the German government was concerned that ECB independence might be compromised.

The comments are another sign that Germany is prepared to alter its stance on intervention by the ECB in the bond markets.

Mr Draghi "in his statement last week clearly addressed the primacy of politics in the euro crisis and the government has no doubt that everything the European Central Bank does happens within the framework of its mandate", the spokesman said.

Asked whether that applied to ECB bond buying, he said: "You can draw the conclusion that what's happening there now has the backing of the government."

Chancellor Merkel's support for Mr Draghi leaves Bundesbank president Jens Weidmann increasingly isolated over his opposition to Mr Draghi's proposal to consider purchasing government bonds in tandem with Europe's rescue fund in return for strict conditions imposed on those countries in need of help. It also rebuffs her coalition partners who have criticised Mr Draghi.

In another sign that the German government is softening its stance, German Foreign Minister Guido Westerwelle warned politicians yesterday to rein in the language they use about the eurozone debt crisis after a weekend of ugly exchanges in the German press over Italy and Greece.

Mr Westerwelle is a former leader of the FDP -- a small, neo-liberal party which props up Chancellor Merkel's government but has been critical of lending to Greece and other indebted countries.

"The tone in the debate is extremely dangerous," Mr Westerwelle said in a statement released in Berlin.

"We've got to take care that we don't talk Europe to death. We can't allow our actions to be reduced to attempts to raise political profiles domestically -- and that goes for Germany too.

"The situation in Europe is too serious for that and there's too much at stake," Mr Westerwelle added.

His comments came after the leader of the CSU, which also props up the government, said Greece should leave the euro before the end of the year.

"In this situation you have to apply the old mountain climbing rule," CSU leader Markus Soeder said on Sunday. "If someone is hanging on your rope and pulling you down into the abyss with him, you have to cut the rope.

"We are at that stage now. If we don't cut the rope on which Greece is hanging in time Germany could be in danger."

Irish Independent

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