German central bank chief criticises EU summit results
GERMANY’S TOP central banker has criticised the decisions of last week’s summit to help debt-laden euro zone members, warning that the bloc was “constantly mutualising risks and weakening the agreed rules”.
“Fiscal aid should be the last resort of crisis management,” Bundesbank president Jens Weidmann said. “This position has by now been recognisably weakened.”
In a speech that looks set to increase political pressure on German chancellor Angela Merkel, Mr Weidmann said strict conditions that had come with emergency aid at the start of the crisis had been “clearly eroded” since then – and possibly again at last week’s European summit.
The summit suggested that rescue funds could buy bonds of countries as long as they stuck to their existing promises of deficit reduction and economic reform rather than submitting to fresh austerity measures.
Should this prove true, Mr Weidmann said, “conditionality would be further weakened” and the idea of aid as a one-off act of last resort undermined.
Dr Merkel has come under fire since last week’s summit for appearing to go soft on conditions for emergency loans in the face of pressure from Italian prime minister Mario Monti and French president François Hollande.
The chancellor has denied this, saying “strict conditions” would apply to any intervention on sovereign-bond markets or direct recapitalisations of banks by the euro zone rescue fund.
Should euro zone leaders press on with loosening conditions, Mr Weidmann warned, they would “largely hollow out” the principles of national responsibility for fiscal policy enshrined in the Maastricht treaty, the euro zone’s founding charter.