September 17, 2012

Merkel Defends ECB, Bundesbank

Says direct aid to eurozone banks can only come after new regulator is formed

Chancellor Angela Merkel of Germany defended both sides of the bond-buying issue, saying that politicians should stay out of European Central Bank (ECB) limits, or lack thereof, in bond purchases but championing the right of the Bundesbank head to challenge them.

Chancellor Angela Merkel of Germany (Photo: AP)Reuters reported Monday that Merkel (left) spoke out in defense of Jens Weidmann, head of the Bundesbank, who has been outspoken in his criticism of the notion that the ECB should buy an unlimited amount of the bonds of troubled countries. He has criticized the plan as being a way for the ECB to finance state budgets.

Merkel’s own finance minister, Wolfgang Schaeuble, had said over the weekend that the very public airing of Weidmann’s views amid the discussion over the pros and cons of the plan was troubling to Germans.

Merkel, however, said in the report that Weidmann had the right to voice his opinion on the crisis. She was quoted saying, "The European Central Bank's independence is for us important and I will not comment on [Weidmann's] remarks on ECB policy."

She added, "I know him, and I know he is very concerned that the crisis is resolved in a truly sustainable way and that the euro is a stable currency.”

At the same time, she said that politicians should keep out of determining limits for the ECB’s debt purchases on the secondary market. She was quoted saying, "It is not for us [politicians] to set the limits [of ECB interventions] ... That is the domain of the ECB."

One of the senior lawmakers from her governing coalition had suggested that debt bought by the ECB was part of the total of Germany’s contribution of 190 billion euros ($249 billion) to the European Stability Mechanism (ESM). Merkel contradicted that, saying that the contribution was not tied to the bond buying program.

She added that direct aid from the ESM to eurozone banks could not begin until after a new supervisory agency for banks throughout Europe was up and running, adding that it was unlikely that such an agency could be stood up by the first of the year.

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