By Chris Cermak
WASHINGTON (MNI) – European Central Bank Governing Council Member
Jens Weidmann said Monday that using central bank’s resources to boost
the E440 billion firepower of of the European Financial Stability
Facility was not appropriate to solve the European debt crisis.
“It’s a recipe that doesn’t work in Europe,” the Bundesbank
president said during a question and answer session following a speech
at the American Council on Germany in Washington.
Asking the ECB to leverage the EFSF “completely blurs the lines
between fiscal and monetary policy,” would “erode public confidence” in
the monetary union and undermine governments’ commitments to fiscal
consolidation, Weidmann said.
Weidmann argued solving the European debt crisis had less to do
with the size of the European bailout mechanism, and more to do with
European governments establishing a credible plan for fiscal
consolidation.
“If you just increase the size of the rescue mechanisms, it’s the
best way to erode the political support” for more fiscal consolidation,
Weidmann said.
But Weidmann, who has also been an outspoken opponent of the July
21 agreement that expanded the EFSF, acknowledged he was often in the
minority in the ECB and made clear the Bundesbank would follow through
on what the ECB decides.
“The Bundesbank is always a loyal part of the euro system,” said
Weidmann, adding the German central bank “will execute what has been
decided.”
Weidmann also suggested he opposed reopening discussions on the
Greek bailout programme agreed July 21, rejecting talk of imposing a
greater burden on private creditors.
“If Greece sticks to these agreements, they should get the
financing they expect,” Weidmann said.
He argued that discussions among policymakers over imposing a
greater haircut on private Greek bondholders “won’t build confidence.”
— Chris Cermak is a Washington DC reporter with Need to Know News
** Market News International Washington Bureau: 202-371-2121 **
[TOPICS: M$$EC$,M$U$$$]