Germany's head of state has accused the European Central Bank of “legally questionable” action in buying up the bonds of countries worst-hit by the eurozone debt crisis.
The blunt attack by German president, Christian Wulff, on Wednesday is the highest profile criticism so far of the ECB’s controversial programme, and highlights widespread concerns in Germany about the politicisation of the euro’s monetary guardian.
So far, the ECB has spent €110 billion on bonds under the programme originally launched in May last year. Last week, it spent €14.3b billion, following €22 billion of bond purchases in the previous seven days. European Union treaties forbid the ECB from buying debt directly from governments, Mr Wulff pointed out. The Frankfurt institution has instead bought bonds on the open market but Mr Wulff argued that the prohibition on central bank financing of governments “only makes sense if those responsible do not get around it by making substantial purchases on the secondary market”.
Officially, the ECB argues that its bond purchase programme is temporary and aimed at ensuring the functioning of financial markets so that its interest rate decisions are passed on effectively to the real economy. That argument has been harder to sustain more recently, however. Jean-Claude Trichet, ECB president, this month used the programme as a lever to force Rome and Madrid to introduce fresh fiscal austerity measures. The ECB hopes that its role in intervening in bond markets will be taken over later this year by the European Financial Stability Facility – once eurozone Member States have approved new powers for the EU’s bail-out fund.
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