|
|
“A currency can only be stable if its future existence is not in doubt”, said Jörg Asmussen, the powerful German member of the ECB’s executive board. He signaled full backing for the bond rescue plan of ECB chief Mario Draghi, brushing aside warnings from the German Bundesbank that large-scale purchases would amount to debt monetisation and a back-door fiscal rescue of insolvent states in breach of EU treaty law.
ECB technicians are examining plans to cap Spanish and Italian bond yields, among other options. This may prove to be the “game changer” that critics around the world have been demanding for two years. The ECB’s director-general of market operations, Ulrich Bindseil, is spearheading the plans in talks with experts from the ECB’s family of national central banks. Market, monetary policy and risk management committees are working to put together a draft.
Mr Asmussen was appointed to the ECB by Germany’s chancellor, Angela Merkel, in January and is close to her inner circle. He was on holiday when the ECB council – 17 national governors and six board members – backed the Draghi Plan earlier this month. It was unclear at the time whether he would acquiesce or join the Bundesbank in protest.
His support for Mr Draghi is crucial. While the ECB can, in theory, enforce its policy by majority vote, it would be hazardous to do so against German opposition. “This is a significant turning point”, said Raoul Ruparel from Open Europe. “Asmussen was hand-picked for the role by Merkel. It means that Draghi has managed to crack what seemed like a solid German wall.”