Tags: Merkel | ECB | Bond | buying

Merkel Wins Support for ECB Bond-buying Stance

Tuesday, 11 September 2012 07:01 AM

Chancellor Angela Merkel won backing for her stance on the European Central Bank's bond buying plans from a key leader of her Bavarian allies on Monday, after others from the southern German party had attacked the scheme as dangerous and possibly illegal.

ECB President Mario Draghi announced last week that the central bank stood ready to buy unlimited amounts of bonds issued by eurozone member states, provided they put in a formal request for aid and fulfilled strict domestic policy conditions.

The step is designed to shore up the fragile eurozone by reducing the borrowing costs of big countries like Italy and Spain, but it has stirred anxiety in Germany where some people fear the ECB is venturing beyond its mandate and potentially exposing taxpayers to billions of euros in risky debt.

Merkel has voiced support for Draghi's bond plan, telling conservative lawmakers in a closed-door meeting on Monday that it was consistent with ECB rules, participants told Reuters.

But members of the Christian Social Union (CSU), Bavarian sister party to Merkel's Christian Democratic Union (CDU), have been sharply critical of the bond-buying plan, exposing divisions in her coalition.

On Monday that changed, with Gerda Hasselfeldt, parliamentary leader of the CSU in the Bundestag, distancing herself from the criticism of her party colleagues and giving her firm support to the ECB, and by implication Merkel.

"We back the ECB's independence, which Germany has fought for particularly hard, and even concerning decisions that cause us uneasiness," Hasselfeldt told Reuters.

"The ECB has made it clear that solidarity, also for them, is not a one-way street. Purchases of bonds will and should only happen when the concerned country has submitted to the diktat of the rescue mechanism."

The support from Hasselfeldt will be welcomed by Merkel, who has come under criticism in the conservative German media and from some economists for tacitly endorsing Draghi's plan.


The German central bank chief, Jens Weidmann, opposed the ECB move announced last Thursday and elements of the conservative establishment support his view that the bond-buying plans violate a taboo on financing state deficits. They also fear it will erode the ECB's independence from politicians.

Bavarian Finance Minister and CSU politician Markus Soeder said the ECB's plans went "well beyond" its mandate, raised the risk of inflation and extended Germany's liabilities.

"In our opinion, this is a dangerous path," he said, adding that the bank was becoming a European "super-authority."

Both Soeder and his CSU colleague Alexander Dobrindt voiced support for another party ally Peter Gauweiler, who said on Sunday he had filed a complaint against the ECB's plans with Germany's Constitutional Court.

Gauweiler said the court may have to postpone its eagerly anticipated ruling on the eurozone's new rescue fund this week because of his complaint.

The court in Karlsruhe is expected to decide on Tuesday whether to go head with its rescue fund ruling on Sept. 12 or delay to consider the complaint. Merkel's spokesman said on Monday the government expected the ruling to go ahead as planned.

"Nothing has changed (because of the latest complaint). We also believe that nothing has changed in substance. That is the government's position," spokesman Steffen Seibert said.

© 2018 Thomson/Reuters. All rights reserved.

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Tuesday, 11 September 2012 07:01 AM
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