Bundesbank criticises Greek deal

Germany's Bundesbank sharpened its criticism of an aid deal for Greece agreed by euro zone leaders last month, saying it weakened incentives for pursuing orderly fiscal policies and that secondary market bond purchases did the same.

"The latest agreements result in a further big step towards joint liability and reduced disciplining via the capital markets," the German central bank said of the July 21ST agreements in its August monthly report, released on Monday.

The agreements reduced incentives for those countries under euro zone aid programmes to pursue economic reforms as quickly as possible to put their public finances on a stable footing again, the Bundesbank added.

"The incentives for appropriate fiscal policy are also further reduced by secondary market (bond) purchases," it added.

Individual countries should primarily deal themselves with the consequences of unsolid fiscal policy, rather than these being divided among the bloc or dealt with in a transfer union, the central bank said.

Turning to Germany, it added: "The low growth in the second quarter is in itself not evidence that the German economy has so far suffered markedly from the weakening of foreign demand and the uncertainty that has recently increased with regard to the situation on financial markets in connection with the debt problems in the euro zone and the United States."

"However, there are appreciable risks concerning this."

Reuters