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ECB Chief Will Skip Fed's Jackson Hole Confab

Tuesday, 28 August 2012 09:48 AM

European Central Bank President Mario Draghi will not attend the annual Jackson Hole meeting of central bankers at the end of this week due to a heavy workload as he gears up for a critical policymaking meeting on Sept. 6.

Draghi had been expected to speak at the Jackson Hole gathering, but the retreat in the U.S. state of Wyoming falls just as ECB policymakers are hammering out the details of a new bond-buying plan aimed at tackling the euro zone debt crisis.

The ECB is being forced to take a greater role in fighting the euro zone crisis while governments negotiate legal and political hurdles to coordinating a longer-term response, but Germany's Bundesbank wants to limit the scope of ECB action.

When asked whether Draghi was no longer planning to attend the Jackson Hole meeting, an ECB spokesman said: "That's correct ... He has a very heavy workload in the coming days."

None of the ECB's six-member Executive Board, the nucleus of the broader 23-man Governing Council, will attend the gathering of top policymakers hosted by the Kansas City Federal Reserve.

However, Bundesbank chief Jens Weidmann still plans to go, the German central bank said.

ECB policymaker Joerg Asmussen said on Monday that the bank's policymakers were still working on operational and technical details of the bond plan, which is aimed at easing the crippling borrowing costs facing Spain and Italy.

Weidmann stepped up his opposition to the plan on Sunday, saying it risked becoming a drug on which governments would get hooked.

In an interview with German weekly Der Spiegel, which ran a headline 'Rebellion of the Bundesbank' on its front page, Weidmann said the buying program verged on the ECB taboo of outright financing of governments.

Asmussen sought to assuage Weidmann's concerns, saying the new programme would ensure countries whose bonds the ECB buys do not soft-pedal on reforms.

As a member of the Executive Board that runs the ECB's day-to-day operations, Asmussen belongs to Draghi's inner circle and is a crucial link man who liaises between the Italian, Weidmann, and the German government, for whom he used to work.

German Chancellor Angela Merkel gave her tacit support to Draghi on a trip to Canada earlier this month and reiterated in a weekend interview that she believed the ECB's policies were in line with its mandate to ensure stable prices in the bloc.



Asmussen did not say on Monday when the ECB would begin buying bonds but he made clear the plan could go ahead despite Bundesbank opposition.

Weidmann's predecessor as Bundesbank chief, Axel Weber, quit last year in protest at the ECB's previous, now dormant bond-buy plan. Another German ECB heavyweight, Juergen Stark, followed him out of the door.

Stark launched a fresh broadside on Tuesday.

"The role the ECB appears ready to take on will overburden the central bank, will allow its independence to be further eroded by politics," Stark wrote in an opinion piece in German business daily Handelsblatt.

"And ultimately, the central bank will no longer be able to fulfil its core task of delivering price stability. There is the risk of higher inflation - not today, not tomorrow, but in the medium- to long-term," he said.

The independence of the ECB and the Bundesbank is highly prized in Germany, where the politicisation of monetary policy led to hyperinflation in the 1920s - an experience that still scars the national psyche today.

Policymakers from beyond the euro zone do not share the Bundesbank's concerns. The United States and the G20 forum has lobbied for more decisive action for several months.

"The central bank's job in the euro zone, just as everywhere, is to provide monetary and financial stability," Adam Posen, an American member of the Bank of England's rate-setting Monetary Policy Committee, told CNBC, speaking in a personal capacity.

"Their mandate is to stop the panic in the sovereign bond market. Buying and selling ... is what central banks are supposed to do," he said.

© 2020 Thomson/Reuters. All rights reserved.

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Tuesday, 28 August 2012 09:48 AM
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