Bundesbank President Jens Weidmann opposed the European Central Bank’s decision to resume bond purchases today, an official familiar with the discussions said.
ECB President Jean-Claude Trichet told a press briefing in Frankfurt that while the decision was not unanimous, it was taken with an “overwhelming majority.” The official, speaking on condition of anonymity because the ECB policy meeting is not public, said Weidmann was not the only Governing Council member against the move. A Bundesbank spokeswoman declined to comment.
Germany’s Bundesbank, under then president Axel Weber, opposed the ECB’s initial decision to start buying the bonds of distressed euro-area governments in May last year, opening a rift with Trichet and other ECB policy makers. The ECB, which ceased purchases 18 weeks ago, re-entered markets today after Italian and Spanish yields soared to euro-era records.
Weidmann interrupted his summer holiday to attend today’s council meeting, the Bundesbank spokeswoman said. When asked during the press conference who opposed reactivation of the purchase program, Trichet declined to comment.
“We have a rule, according to which we speak with one voice when the decision is taken,” Trichet said later in an interview with Bloomberg Television. Central banks around the world take decisions based on majority rather than unanimity, he said.
Weber last year argued against buying bonds on the grounds that the action poses “stability risks.” At that time, ECB Executive Board member Juergen Stark, a former Bundesbank vice president, said he shared Weber’s opinion.
“But such risks only emerge if these measures are used over the long term and the additional liquidity isn’t absorbed,” Stark was quoted as saying by the Frankfurter Allgemeine Sonntagszeitung on May 17, 2010.
Trichet said today the purchases are not quantitative easing because the ECB will continue to “sterilize” them by taking term deposits from banks equal to the amount of liquidity created. The ECB has bought 74 billion euros ($105 billion) of bonds since initiating its program last year.
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