The German newspaper Bild Am Sonntag, among others, carries an interesting article which depicts growing anxiety within the ECB over the upcoming GCC hearings regarding OMT in mid-June. Here is my Blankfiendian translation: „In der Bun...
The German newspaper Bild Am Sonntag, among others, carries an interesting article which depicts growing anxiety within the ECB over the upcoming GCC hearings regarding OMT in mid-June. Here is my Blankfiendian translation: „In der Bundesbank gibt es echte Euro-Gegner“ "Berlin/Frankfurt – Anxiety mounts at the European Central Bank (ECB) over the upcoming decision of the Constitutional Court regarding the euro rescue package (ESM) - and rage at the Bundesbank. Background: On June 11 the Karlsruhe Court will hold hearings concerning the ESM. By an express ruling, the judges had in September approved the ESM under certain conditions, but expressed great reservations that the unlimited purchases of the government bonds of euro crisis countries (e.g. Italy, Spain) would violate the strict prohibition against monetary state financing. The mere ECB announcement that it would buy government bonds, indefinitely if necessary and under certain conditions, brought calm to the euro zone for a year – yet it remains controversial. Bundesbank Chief Jens Weidmann fears inflation, mounting debt, and a stalling of reforms. In an opinion for the Court hearing, Weidmann has recently supported his criticism in sharp words - much to the annoyance of ECB chief Mario Draghi. His concern: If the Constitutional Court sets significant limits on the purchase program (known as "OMT"), or stops it completely, the euro crisis will erupt anew. "There are real euro opponents in the Bundesbank", according to ECB circles. Behind the scenes, they exert pressure on the Constitutional Court. The beneficiary States are bound to strict conditions for possible acquisitions. Secretly, both sides expect the dispute to heat up. Because the fact is: if it were up to Bundesbank Chief Weidmann, the Court would stop the ECB purchase program altogether." The highlight in the last sentence of the article is not mine - it comes directly from the Bild website.An article in the Frankfurter Allgemeine Zeitung entitled "EZB vermutet angeblich „Euro-Gegner“ in der Bundesbank" echoes a similar theme. I will only give you my Blankfiendian translation of the last part of the article, as the first part is really almost lifted from Bild."Bundesbank already questioned arguments used by the ECB ECB President Mario Draghi announced in the summer of last year, to intervene indefinitely, if necessary, in the face of rising bond yields in countries particularly affected by the euro crisis. He justified this by asserting that high interest rates for the crisis states were leading to even higher interest rates for businesses in those countries, among other things. The German Bundesbank later questioned the arguments of the ECB in an opposing opinion submitted to the Federal Constitutional Court. Even if higher interest rates for companies in crisis countries threatened, „it would not be for monetary policy to fight against this development, but the immediate consequence of the autonomous national fiscal policies". Different market interest rates would not be inconsistent with the single monetary policy. If national fiscal policy increases the risks in individual countries, and leads to higher interest rates for companies, the correction is no task for monetary policy. Also the risk that a country could withdraw from the monetary union is not a justification for intervention by the central bank. For the question of such a fate lies solely in the hands of the sovereign state. The ECB could therefore make no such guarantees. So far, the ECB has not bought any government bonds under the new OMT program (Outright Monetary Transactions) the Bundesbank refers to. However, in the markets, the program for countries in crisis has provided for relaxation. Merely the announcement by the ECB pushed interest rates for worrisome euro countries, such as Spain and Italy, down." I fully realize from the lack of comments lately that most of you think I am beating a dead horse, perserverating, playing a
