Weidmann gains traction with policy pushback
By Paul Carrel
FRANKFURT (Reuters) - A German-led faction at the European Central Bank is leading a riposte against the bank's unprecedented loosening of lending policy and may be pushing at an open door this time after a string of setbacks that left the ECB deeply divided last year.
Bundesbank chief Jens Weidmann is leading the charge, pressing for the ECB to think about an exit strategy after it unleashed more than 1 trillion euros into the financial system in the last two months in twin ultra-long funding operations.
A leading German newspaper published details last week of a letter Weidmann wrote to ECB President Mario Draghi to air his concerns about risks stemming from an ECB move to ease rules on the collateral banks must put up to tap its funding operations.
Weidmann went fully public on Saturday, telling German weekly news magazine Spiegel: "The programme may have a calming effect in the short term but it is a calm which could be deceptive."
On the face of it, the debate has echoes of a division last year on the ECB's Governing Council that saw two Germans quit in protest at the bank's buying of sovereign bonds - a measure they felt came too close to financing governments.
Then, markets were rattled by the internal discord and the question mark it put over the ECB's ability to act decisively.
This time around, however, the personalities involved are more collegiate and the policy differences are over the detail of what collateral the ECB should accept rather than the fundamental nature of its crisis-fighting strategy.
Nobody could accuse the Draghi-led ECB of not acting decisively since he took the helm late last year but the signs are that even he believes the central bank has now done its bit to tackle the euro zone debt crisis. Continued...