hurricanemaxi
Joined: 17 Sep 2011
Posts: 83
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 Posted: Sun Dec 11, 2011 11:05 pm Post subject: Bundesbank Cools ECB Bond-Buying Talk |
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Germany’s top central banker cooled speculation that the European Central Bank will extend its role as European leaders pressed their case that a new fiscal accord will deliver the region from its two-year-old debt crisis.
Bundesbank President Jens Weidmann told the Frankfurter Allgemeine Sonntagszeitung that while the new accord represents “progress,” the onus is on governments rather than the Frankfurt-based ECB to resolve the crisis with financial backing. German Finance Minister Wolfgang Schaeuble said euro- area policy makers will now focus on implementing the Dec. 9 pact to strengthen budget rules as quickly as possible.
“The mandate for redistributing taxpayer money among member states clearly does not lie in monetary policy,” Weidmann told the newspaper in an interview published yesterday. “Financing of sovereign debt through central banks is and remains forbidden by treaty,” the central banker said.
The Franco-German-led agreement, which provides tighter budget rules and an additional 200 billion euros ($267 billion) to the euro war chest, is part of an effort to reassure investors that European leaders can master the crisis. ECB President Mario Draghi lauded the accord, stoking hopes among investors that the central bank might step up bond purchases.
‘Lastingly Stable Euro’
Chancellor Angela Merkel said the accord set the region on a path to a “lastingly stable euro” after European leaders convened in Brussels, adding that “the breakthrough to a stable union has been achieved.” The single currency will now be “more robust” after the acute stage of the crisis subsides, Finland’s Prime Minister Jyrki Katainen told YLE Radio Suomi yesterday.
The accord opens the way for the ECB to intensify its role in the crisis, Irish Deputy Prime Minister Eamon Gilmore said in an interview with Dublin-based broadcaster RTE yesterday. The ECB has signaled “that it would strengthen its role and enhance its role following the conclusion of an agreement,” Gilmore said.
“The ECB will have to gear up its purchases should market tension increase, there is simply no other option available,” Thomas Costerg, an economist at Standard Chartered Bank in London, wrote in e-mailed response to a Bloomberg News query.
Investors gave a mixed reaction before the weekend. European stocks rose, while the euro pared gains on speculation that national authorities will struggle to implement the agreement. Yields on Italy’s 10-year notes rose 8 basis points to 6.53 percent, while Spain’s gained 3 basis points to 5.85 percent.
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