German Officials Push For More ECB Control
05-Aug-2012
German politicians and former European Central Bank officials sharply criticized the ECB over the weekend and pushed for Germany, as the largest contributor to the euro zone rescue effort, to have more control in the central bank's matters, after President Mario Draghi signaled that the central bank could soon start purchasing government bonds.
"The new situation that Germany provides a growing share of the euro rescue, but has only one vote just like any other country no longer fits," Herbert Reul, a German politician and chairman of the Christian Democratic Union and Christian Social Union group within the European Parliament, told German magazine Focus on Sunday.
On Thursday, Mr. Draghi indicated that the European Central Bank may soon step in to buy government bonds on the open market and consider other unconventional measures to lower the high borrowing costs of financially stressed euro-zone economies.
The Deutsche Bundesbank, Germany's central bank, has adamantly opposed the ECB's government bond purchases for more than two years, arguing they discourage governments from implementing much-needed reforms.
It had reiterated its opposition in the days leading up to the ECB's press conference on Thursday. In an unusually candid move, Mr. Draghi noted during the conference that the Deutsche Bundesbank, Germany's central bank, and its president, Jens Weidmann, had reservations about programs that envision buying bonds.
After resigning from the ECB last year in opposition to its bond buying program, former executive board member Juergen Stark warned in press reports that the further bond buys by the ECB would amount to "printing money," and risk increasing inflation.
"The monetary policy has long been taken up by tasks, for which it has no mandate," Mr. Stark told German newspaper Frankfurter Allgemeine Sonntagszeitung in an interview pre-released on Saturday, warning that the organization is losing its independence.
The Bundesbank had always strictly aligned with the ECBs' mandate to ensure price stability and has defended its independence in the face of politician pressure, Mr. Stark said further in an interview with Focus magazine.
"This has changed with the ECB," he told the magazine.
While Germany holds 27.1% of the capital of the central bank, Executive Board Member Joerg Asmussen is the only other German on the 23-member governing council after Mr. Weidmann, who has just one vote.
In an interview with Focus magazine, Foreign Minister Guido Westerwelle said the problem is that "the economic and demographic weight in some committees and situations is not represented accordingly."
To strengthen the weight of the Bundesbank, Mr. Stark suggested to Focus magazine that the ECB remake its board, which today includes 23 members, to a nine-member board set up, where big member states such as Germany would receive a permanent seat and the other states would share the remaining seats.
That would require changes to both the Maastricht Treaty and the ECB's statutes, he noted.
(END) Dow Jones Newswires |
