BERLIN (Reuters) - The European Central Bank will only buy a euro zone country’s sovereign bonds if it commits to “hard reforms”, ECB policymaker Joerg Asmussen said on Friday, seeking to soothe German concerns that the central bank is embarking on a risky new strategy.
German media attacked the ECB’s agreement on Thursday to launch a new and potentially unlimited bond-buying program to lower struggling euro zone countries’ borrowing costs and draw a line under the debt crisis, with mass-selling daily Bild running a headline on Friday reading: “Blank cheque for debt states”.
Asmussen, a former deputy German finance minister, took to the airwaves early to stress the conditions tied to the plan.
“(Bond buying) will only take place when the country undertakes tough reform measures. That is a necessary precondition for the ECB to act,” he told Inforadio rbb.
“We will do our part, within our mandate,” he added, with reference to the ECB’s core task of delivering stable prices - a perennial preoccupation in Germany.
The ECB was hurt last year when it bought Italian and Spanish bonds, only for Italy’s then-prime minister, Silvio Berlusconi, to go back on the reform promises he had made to get the ECB to step in just days after he made the commitments.
Asmussen said ECB bond purchases - aimed at repairing malfunctioning monetary policy in the euro zone - could not substitute for the reforms government must pursue to shape up their economies.
“They can only take place when the affected country commits itself to hard reforms. This is an imperative, a necessary prerequisite for our function,” he said.
“We must avoid decreasing pressure on the states concerned to implement reforms on their budgets, bolster competitiveness or getting banks’ balance sheets in order,” he added.
Reporting by Christian Goetz; Writing by Victoria Bryan and Paul Carrel; Editing by Hugh Lawson