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Schaeuble Rejects ECB as Lender of Last Resort, Joint Bonds

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Jan. 15 (Bloomberg) -- German Finance Minister Wolfgang Schaeuble renewed his rejection of joint euro region bond sales and said giving the European Central Bank the role of lender of last resort wouldn’t calm markets permanently.

“If the central bank finances government debt, it’s a modern form of the old bad habit that if the government doesn’t have enough money, it prints money,” Schaeuble said today in Berlin. “If we start doing this, markets will calm down for some time. But then they realize that the European currency is not a stable currency” in the long run.

Selling government bonds jointly in the euro region isn’t a solution to the euro region’s debt crisis because it would mean that governments “can pile up debt without being liable for it,” Schaeuble also said in Berlin after attending the screening of a documentary on the region’s woes.

Germany was left with the euro-area’s only stable AAA rating as S&P stripped France and Austria of their top credit grades, citing “insufficient” policy steps to combat the debt crisis. Germany and France are pushing for stricter budget rules as the bedrock of European governments’ response to the debt crisis that emerged in Greece in late 2009 and is now buffeting Spain and Italy.

“We wouldn’t solve the problem,” Schaeuble said, referring to joint bond sales and relying on the central bank to finance state debt. “The countries must reduce their debts. We can talk about the speed at which this has to be achieved.”

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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