Bundesbank president, Jens Weidmann, said that only politicians could resolve the crisis, and he rejected the idea of using the ECB as “lender of last resort” to governments.
The president of the Bundesbank has firmly rebuffed international demands for decisive intervention in the bond markets by the European Central Bank to combat the eurozone debt crisis, warning that such steps would add to instability by violating European law. He also criticised actions taken by eurozone governments as “inconsistent”, and warned that their plans to involve private sector banks in rescue plans for Greece could add to the eurozone’s woes. Such private sector involvement, he said, could undermine market confidence in the eurozone’s crisis-fighting tools such as the rescue fund, the European Financial Stability Facility.
Mr Weidmann highlighted the stance being taken by the Bundesbank by arguing that governments, not central banks, were mainly responsible for ensuring financial stability. Mario Draghi, the ECB’s new president, has said it is not the ECB’s job to act as lender of last resort, but Mr Weidmann went further, saying such a step would breach Europe’s ban on “monetary financing” – central bank funding of governments.
“I cannot see how you can ensure the stability of a monetary union by violating its legal provisions”, Mr Weidmann argued. “I don’t see how you can build trust in a system that violates laws.”
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