France welcomes ECB bond-buying confirmation


A SENIOR figure in French president François Hollande’s party has accused the European Central Bank of “starving” the people of Europe by not acting immediately to ease financial pressure on struggling euro zone states.

The French government broadly welcomed confirmation from ECB president Mario Draghi that the bank would buy up the bonds of ailing states on condition that they first request euro zone bailouts.

Finance minister Pierre Moscovici, who has lobbied hard for ECB intervention to calm the markets, highlighted Mr Draghi’s remark that the euro was “irreversible” and welcomed the news the bank would design a new instrument for bond-buying over the coming weeks.

In a hint of French impatience, however, Didier Guillaume, the socialist vice-president of the senate, denounced the ECB’s refusal to act immediately.

Asked if he was disappointed by Mr Draghi’s comments, Mr Guillaume replied: “Yes . . . The ECB cannot continue starving people, sniping at troubled states.

“Of course, the Bundesbank doesn’t want to intervene, saying ‘first people must make an effort’. But by making these efforts, they’ll be on the rails, they won’t be able to do anything. That’s why it’s essential for the ECB to intervene directly,” he added.

Paris had been buoyed last week by Mr Draghi’s commitment to do “whatever it takes” to secure the euro, but the initial reaction to his comments on Thursday was lukewarm. The Paris stock exchange fell 2.68 per cent, before picking up yesterday.

The leading financial newspapers were similarly downbeat. “Draghi takes the risk of a hot summer on the markets,” declared the daily Les Echos yesterday, while La Tribune, in its front page headline, said: “Draghi makes the markets plunge.” The papers also portrayed as a setback for France Mr Draghi’s statement that the euro zone’s permanent bailout fund could not be given a banking licence.

France, along with Spain and Italy, has pressed for the European Stability Mechanism (ESM) to be given the status of a bank, which would allow it to access ECB funding and thus bolster its firepower to intervene in bond markets. But Mr Draghi said the ECB’s legal advice was that this would be against European law.

Mr Hollande publicly welcomed Mr Draghi’s comments, judging them “important” and consistent with the conclusions of the EU leaders’ summit in June. “It will allow the ECB to intervene when necessary,” he said, but added that there was still a need for vigilance in the face of market “turbulence”.

In Berlin, chancellor Angela Merkel’s ruling coalition gave a generally positive if cautious response to the ECB bond-buying proposal, though some party rebels attacked the move.

Norbert Barthle, budgetary spokesman for the ruling CDU, said he was “happy” that Mr Draghi made ECB bond-buying conditional on a full bailout and further reforms.

“In the crisis countries we need sustainable and credible structural reforms, the reduction of sovereign debt and economic growth,” said Mr Barthle.

Philip Rösler, economics minister in the Merkel government and head of junior coalition partner FDP, said “bond purchases are an option”, but only if they avoid driving inflation.

Rainer Brüderle, FDP Bundestag floor leader, said that “one must be wary that a discussion will be started to bring down public deficits by printing money”.

“This is not the mandate of the ECB; it has just one mandate alone, namely to assure the stability of our currency,” he said.

Mr Brüderle said it was “right to link to conditions insofar as Mr Draghi has indeed set a policy in motion which one can accept.”

Elmar Brok, MEP for Merkel’s CDU, said limited bond-buying was a “wise middle path”. “Nobody wants to destroy the currency, the ECB will intervene,” he said. “But it is more sustainable when this is combined with the necessary savings measures.”

Opposition politicians criticised the move, with the Social Democrats (SPD) accusing Dr Merkel of forcing the ECB to act to buy time for the euro zone. “Instead of fighting for Europe, she takes the easy route and drives the ECB to a further debt buy-up programme,” said Frank-Walter Steinmeier, SPD Bundestag leader.