Bundesbank President Jens Weidmann said a proposed new wave of sovereign bond purchases by the European Central Bank may increase governments’ reliance on such funding and won’t help solve the euro-area debt crisis.
“We shouldn’t underestimate the danger that central bank financing can become addictive like a drug,” Weidmann said in an interview with Der Spiegel. “Such policy is too close to state financing via the money press for me.”
ECB President Mario Draghi said earlier this month that the central bank may intervene in the secondary market to lower yields in countries that ask Europe’s bailout fund to buy its bonds in the primary market. While such a move would ensure conditionality, the Bundesbank has been critical of the plan.
“In democracies, parliaments rather than central banks should decide on such an encompassing mutualization of risks,” Spiegel cited Weidmann as saying in an e-mailed summary of the interview today. The plans are becoming “concerted actions by the state rescue mechanisms and the central bank. That causes a link between fiscal and monetary policy.”
Weidmann said that while he doesn’t see an immediate danger of inflation, central bankers risk losing their focus on their primary objective if they become political problem solvers, according to the Hamburg-based magazine.
The ECB shouldn’t be forced to “guarantee that states remain in the euro area at all costs,” Weidmann said.
In the decision on whether Greece should leave the euro, it will “certainly play a role that no further damage is done to confidence in the framework of the currency union and that the requirements of aid programs retain their credibility,” he said.
The Bundesbank chief also said that central bankers must be ready to explain in public the convictions they express in the ECB Governing Council.