Debt crisis: ECB rescue plan could be 'addictive like a drug', says Weidmann
CENTRAL bank financing can be "addictive like a drug", the president of the Bundesbank has warned, in comments that emphasize the dangerous gulf between Germany and the European Central Bank.
Jens Weidmann argued that any radical effort to buy eurozone’s stricken sovereign bonds, as hinted by ECB president Mario Draghi three weeks ago, would be an inappropriate extension of the bank’s mandate.
“In democracies, parliaments rather than central banks should decide on such an encompassing mutualization of risks,” he said at the weekend, adding that it was not the ECB’s job to “guarantee that states remain in the euro area at all costs.”
“We shouldn’t underestimate the danger that central bank financing can become addictive like a drug. Such policy is too close to state financing via the money press for me,” he said.
Angela Merkel, German chancellor, said that unlike Mr Weidmann she believed the ECB was acting within its mandate but she said it was “good” that he warned “politicians again and again” about over-stretching the ECB.
The comments will fuel fears that Germany is ready to scupper the ECB’s efforts to launch an unlimited bond buying programme to bring down the borrowing costs of Spain and Italy. The so-called 'Draghi Plan’ triggered a rally on global markets throughout August as traders bet that the ECB would unveil the proposal after its meeting next week. If Germany manages to stall the plans, hopes for a recovery could also quickly stall.
As the war of words raged over whether Athens should be given more time to meet its austerity targets, Ms Merkel called for politicials to “weigh their words very carefully”.
Foreign minister Guido Westerwelle, called for Germans to “stop bullying” Greeks. Mr Westerwelle criticised fellow politicians calling for Greece to be ejected from the eurozone. “The bullying of individual countries in Europe has to stop,” he said, arguing that the language undermines Germann policies and its standing abroad.
The Austrian Chancellor Werner Faymann broke ranks and said he would be happy for the Greece’s austerity deadlines to be relaxed. “The most important thing is that the Greeks stick to the reforms and savings targets agreed with us,” he said. “If that is guaranteed, I am in favour of a delay in the repayment. That could be a delay of two or three years - the experts should decide that.”
Ms Merkel refused to comment after Greece’s prime minister Antonis Samaras asked for “time to breathe”, while economy minister Philipp Roesler said the idea “was not do-able”.
At a meeting with Francois Hollande on Saturday, Mr Samaras found that even France’s position had hardened. “Greece needs once again to demonstrate the credibility of its programme and the determination of its leaders to go all the way,” said Mr Hollande. “Once these commitments, which are not only financial but about structural reforms that the Greeks want, have been ratified by parliament and confirmed, Europe must do its part.”
Meanwhile, Athens needs to find an extra €4bn of cuts over the next two years - taking the total to €17.9bn - to stand a chance of meeting its austerity targets, according to Greek finance officials quoted annoymously at the weekend.
Louise Armitstead Telegraph.co.uk