ECB plan 'calls independence into question'

Mon, Sep 10, 2012, 01:00

The European Central Bank's plans to buy the debt of troubled euro zone states calls its independence into question and takes it to the limits of its mandate, a senior member of Chancellor Angela Merkel's ruling conservatives said today.

The plans for potentially unlimited purchases of bonds issued by countries that request a European bailout and fulfil strict domestic policy conditions has stirred anxiety in Germany over the growing costs of the nearly three-year-old debt crisis.

The German central bank chief, Jens Weidmann, opposed the ECB move and some conservatives share 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.

But Dr Merkel and the country's finance minister Wolfgang Schäuble have thrown their support behind ECB chief Mario Draghi's plan to help euro zone states manage their debts.

"Because an ECB intervention (in the bond markets) hinges on politically determined programmes, the bank's independence is brought a little bit into question," Volker Kauder, the Christian Democrats' (CDU) parliamentary leader and a close ally of Dr Merkel, told the Bild daily.

"The ECB has reached the border of what is permitted, also because it is moving into the area of state financing. These are quite simply extraordinary times," Mr Kauder said.

But if the ECB did not act, the risks would rise, he added. "A failure of the euro would be incalculably more costly," he told Bild, which has long criticised bailouts of struggling states like Greece.

A keenly-awaited ruling by Germany's Constitutional Court on Wednesday is expected to put aside challenges to the legality of the euro zone's permanent new bailout fund, the European Stability Mechanism (ESM).

Dr Merkel's spokesman said today the government remained convinced the ESM was in line with the constitution despite a new complaint filed by lawmaker Peter Gauweiler, from the CDU's Bavaria-based sister party, the Christian Social Union (CSU).

"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.

The court in Karlsruhe was considering Mr Gauweiler's fresh injunction request today and was expected to say tomorrow whether it would accept it - and whether this would delay the ruling scheduled for Wednesday on the ESM.

Mr Kauder said he hoped for a positive verdict, describing the ESM as "the central building block" for overcoming the crisis".

Underlining the strong feelings on the ECB plan in the more eurosceptic wing of Merkel's coalition, another CSU politician said Mr Weidmann should have tried harder to block the move.

Calling the plans "wrong and hugely hazardous", Alexander Dobrindt, the CSU's executive secretary, told the Augsburger Allgemeine newspaper: "(I regret) that Bundesbank chief Jens Weidmann did not assert himself at the decisive ECB sitting."

Dobrindt, who has been criticised for comments predicting Greece would leave the euro zone, said he had "great sympathy" for Mr Gauweiler's legal challenge of the ECB decision.

Reuters

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