The European Central Bank cannot use its bond-buying programme to prop up troubled euro zone states forever, and governments bear the main responsibility for fighting the debt crisis, ECB executive board member Joerg Asmussen said today.
The comments by Mr Asmussen, who joined the ECB at the start of the year, are broadly in line with the views of ECB president Mario Draghi who has termed the bond buying "neither infinite nor eternal". But it also fits with the view of other German ECB policymakers, who have led opposition to the programme or its more aggressive use since last year.
Juergen Stark and Axel Weber both resigned last year in protest at the programme, which they said took the ECB into the realm of fiscal policy and away from its core role of delivering stable prices.
Speaking on German radio station Deutschlandfunk, Mr Asmussen also said that he saw no danger of the programme generating inflationary pressure. He said the ECB had a mandate to contribute to the stability of financial markets.
"It is an important mandate but it is also a mandate with limits," he said. "And that's why that one should not overburden monetary policy. The main responsibility for fighting the current crisis lies with the governments."
The SMP (Securities Markets Programme) is neither unlimited nor can it last forever," he added.ECB Governing Council member Ewald Nowotny was quoted as
saying earlier this week that the bank was exploring alternatives to the bond-purchase programme but had yet to decide on any replacement policy tool.
The ECB's biggest contribution to efforts to calm the euro zone crisis in recent weeks has been the provision of almost half a trillion in three-year loans to banks, something that has propped up short-term debt sales by euro zone governments.
While Germany continues to oppose more aggressive bond buying by the ECB to halt the crisis, for example by acting as a lender of last resort for euro zone governments and banks, the pressure for it to do so from other countries and market players has grown.
Asked if the ECB council was also debating buying other securities on the market or other forms of bonds from commercial banks, Mr Asmussen said: "I will not comment on possible discussions on the Board of governers. The talks are confidential...The ECB has a whole series of further unconventional measures, for example the liquidity operations."
The bond-buying programme has propped up debt markets in Italy and Spain in recent months and prevented borrowing costs for two of the euro zone's biggest economies reaching levels that have forced Greece and others to seek EU and IMF bailouts.
Mr Asmussen stuck to the familiar line from policymakers that the most important task currently was for governments to get the euro zone's ESM permanent rescue fund up and running as fast as possible.
"We need important and high firewalls to limit potential contagion," he said. "Thus, one should quickly strengthen this ESM and implement it as soon as possible."
Asked if the ECB would be able to halt the bond-buying programme at that stage, Asmussen said: "We'll then decide that independently and intelligently."
Asmussen said the ESM had considerable advantages over the EFSF temporary rescue fund put in place previously as a stop gap to help Greece and others.
"It's an international financial institute and it has a paid-in capital," he said."It's in a better position to issue bonds and if necessary under certain conditions to help states. So the basic construction of the ESM, which will be a permanent institution, is considerably more stable from a financial technical point of view than the EFSF.
"The EFSF functioned well but was created on one weekend in the crisis. It worked out...but what's decisive is to strengthen the ESM and move its launch forward as quickly as possible."
Asked if Germany should pay its contribution more quickly into the ESM to raise its firepower, he said: "We believe that the capital that has to be paid into the ESM to make it operative should be moved forward as far as possible to create firewalls.
"But that is the case for all members of the ESM and not only Germany," Asmussen said. He was also asked if all members should pay a higher contribution, but Asmussen did not answer the question: "We believe that we need stable, high firewalls."
Reuters
