ECB'S Weidmann says wrong to ditch monetary policy principles

Sat Sep 17, 2011 1:54pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

BERLIN (Reuters) - ECB Governing Council member Jens Weidmann, an opponent of the bank's bond-buying program, told Germany's Spiegel magazine the ECB had burdened itself with considerable risk and it was wrong to abandon established principles of monetary policy.

The usual divisions between fiscal and monetary policy had become blurred, and some measures carried particular dangers, he said in an interview made available on Saturday.

"Once monetary policy starts to be used, there will always appear to be reasons to suggest it should continue to be used," he told Spiegel.

"Of course in such an unusual crisis it would be wrong to stubbornly dwell on principles. But it would be just as wrong to throw out all established rules of monetary policy by citing a general emergency," said Weidmann, who heads Germany's Bundesbank.

Weidmann, like former ECB policy maker Juergen Stark, opposed the ECB's decision in August to reactivate the bond plan following a 19-week pause. The bank decided to buy the bonds of Italy and Spain after they came closer to succumbing to the debt crisis.

"It is indisputable that buying bonds on the secondary market does not ease underlying problems," he said.

Weidmann added that in taking risk upon itself the euro zone reallocated risk among the tax payers of individual countries.

"We must reduce these risks, as at present German tax payers bear 27 percent."

He added it was unhelpful to speculate about what might happen should Greece not stick to the aid conditions.   Continued...