ECB president Jean-Claude Trichet defended the ECB's bond buying scheme, telling a conference organised by the Austrian central bank in Vienna that it did not undermine the ECB's core policy of stable prices nor its independence.
"We are not printing money," he declared, answering directly the charge that a central bank which buys government debt effectively creates money over which it then cannot exert any control.
"This confirms and underpins our commitment to price stability," he said.
The ECB has come under fire for its unprecedented move earlier this month to buy up government debt in an effort to halt speculative attacks on eurozone members and restore stability to bond markets.
However, in the western German city of Mainz, Bundesbank President Axel Weber, a key member of the ECB governing council, reiterated his criticism of the ECB programme.
"Monetary policy has taken new paths to fight the crisis that I continue to view critically owing to the risks" involved in buying a country's debt, said Weber, an unofficial candidate to become the next ECB chief in late 2011.
The ECB decision covered bonds issued by troubled eurozone countries such as Greece, Portugal and Spain, allowing cash-starved commercial banks in those countries to now sell them to the ECB to get funding in return.
Weber voted against the measure and has repeatedly challenged it since.
The German central bank governor said Monday he was concerned above all about the ECB's independence from political pressure.
One should "draw a clear line of separation between responsibility for monetary policy and fiscal policy," Weber said.
Some analysts have argued that the ECB risks turning into a "bad bank" if it keeps buying government bonds from troubled eurozone countries. The term "bad bank" refers to a financial structure created to take on risky debt from commercial banks so that they can get their own finances in order.
Trichet disagreed with this view.
"The latest measures address a malfunctioning of certain market segments," he said in Vienna.
"Without such measures, the market problems could have created risks to the favourable outlook for price stability. However, we have not gone beyond the goal of re-establishing a more correct transmission of our monetary policy."
Weber argued meanwhile that the ECB's duty was to maintain price stability and that only an independent central bank can do that.
"We should now limit the risks," Weber said. "The operation must be carried out in a very targeted and limited way."
It should "serve as a bridge until new state financing facilities" agreed by the European Union can take over, Weber said in reference to a €750-billion rescue package drawn up by the EU and International Monetary Fund.
The German news weekly Der Spiegel said in its latest edition the the ECB is buying Greek bonds even though it no longer needs to do so because an EU-IMF rescue package for the country has already taken effect.
Quoting sources within the German central bank, the magazine claimed that the ECB was underpinning rates and allowing French banks, which have the biggest exposure to Greek debt, to sell their holdings down.
Der Spiegel spoke of fears of a "French plot" under which Trichet, who is French, had "ceded to massive pressure" from French President Nicolas Sarkozy.
German banks have pledged to hold on to their Greek bonds until 2013, the magazine added.
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