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Merkel: EU must not dictate ECB action

The Local · 25 Oct 2011, 16:34

Published: 25 Oct 2011 16:34 GMT+02:00

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"We must not allow a misunderstanding, whereby politicians expect something from the ECB," Merkel told a press conference, referring to the role the central bank might play in helping deal with Europe's sovereign debt problem.

"We are negotiating with a view to have the ECB put forward its own point of view" on how it wants to help deal with the crisis, she said.

Germany is strongly attached to the ECB's independence and has long defended its right to be the final arbiter of monetary policy.

A statement currently being discussed for adoption by Wednesday's EU summit refers to demands by EU leaders that the ECB maintain support measures for banks and indebted eurozone governments.

"Germany does not accept such a sentence in the communiqué," Merkel told reporters following a meeting with Bangladeshi Prime Minister Sheikh Hasina Wajed.

The proposed EU statement says: "We fully support the ECB in its action to ensure price stability in the euro area, including its non-standard measures in the current exceptional financial market environment."

The ECB has so far bought a total of €169.5 billion in eurozone government bonds since it first began operations early last year as part of efforts to ease debt strains in the 17-nation bloc.

Current plans would see a newly boosted European Financial Stability Facility (EFSF) take over responsibility from the ECB for buying the bonds of debt-troubled countries.

German newspapers on Tuesday expressed concern, however, that the EFSF would not have the fire-power needed to deal with contagion if the crisis spreads further.

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Quoting diplomatic sources, several newspapers suggested the ECB would have to continue helping the EFSF provide financial clout to deal with the crisis.

Merkel appears determined to maintain a firewall between the EFSF and the ECB, which, according to its constitution, should be free of all outside political influence.


The Local (news@thelocal.de)

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Your comments about this article

17:12 October 25, 2011 by storymann
"The ECB has so far bought a total €169.5 billion in eurozone government bonds since it first began operations early last year as part of efforts to ease debt strains in the 17-nation bloc",

That is a lot of unsecured debt to be holding. If 50% of the bonds are Greek bonds , I suspect the amount is higher and if they write off 50% of Greek debt that would be a major hit to the ECB.

EFSF does not have the fire power nor does the ECB.

The EU countries are more about Nationalism than a true fiscal union.

Until the stronger nations realize that they will have to support and bail out the weaker ones this is going to be a never ending saga until one or more of the stronger nations pulls out.
18:10 October 25, 2011 by luckylongshot
What seems to be going on behind the scenes here is a hidden power shift from the European Governments to the ECB. There is a real danger that the financial power in Europe slides away from elected Governments, who seem to be willing to allow this to happen, into the hands of Brussels bureaucrats and the bankers that support them. This is a horror scenario for the European public and I hope it never occurs.
20:07 October 25, 2011 by Jack Kerouac
@ Storymann

I couldn't agree more. The stronger nations will be forced into this role of "saviour" of the weaker nations when it comes to fiscal responsibility. The sad thing is, when someone is bailed out, there is no incentive for change, and they are doomed to repeat the mistakes over and over again. A lot of the Southern European countries have a different work ethic, and widespread corruption up to the government level - something that a bail-out will never change. Don't deal with the symptoms, deal with the underlying problems.
07:22 October 26, 2011 by Sastry.M
Tollem Causa--root out the cause. Whether capitalist or communist in socio-economic theories, greed of human desires merely changes form in application but cannot be entirely obliterated (Prof.Klaus Mehnert-"Peking and Moscow").

E.U governments politically manage the agricultural and industrially productive European people. But the economic management is left to individual national traits. If a commonality is sought to be established, it should keep in mind all things, corresponding to Divined European Life in general. To this end the typical paths of various mindsets for corruption has to be be straightened up in enacting an EU Grund Gesetz for membership, irrespective of influential Berlin,Brussels or Paris. Thus, one may ensure an economic solace to productive European Culture regulating all human transactions rather than leaving it to the speculative positiveness of big corporate bankers playing politically with the destinies of individual member nations.
08:49 October 26, 2011 by delvek
THe DM is being printed and stock piled.

The EU is about as good as done. Successful integration of East Germany has taken place and the single currency is no longer a need for the strongest economy in Europe.

Stay tuned ...
11:44 October 28, 2011 by Deutschguy
@delvek: Where is your link or evidence that DMs are being printed and stockpiled?

Because if they are, then a lot of powerful people are going to jail for a long, long time. And, Europe will sink into a depression and maybe take the rest of the world with it, if the common currency is abandoned.

The only successful way forward for a majority of Europeans is to strengthen the EU and have further integration and public accountability. It is the "local" parochial elites, financial and political, who resent Brussels and the diminishing of their power and influence.

The work ethic of middle class and private sector Greeks is no different than other nation's in the EU. It is the government sector unions who are at fault in Greece, along with the politicians who gave into them. A majority of Greeks disapprove of the the power and corruption of those public sector unions. They blame their government and the misbehavior of Big Banks for issuing debt and unsound financial instruments when they shouldn't have. That blame is shared worldwide, including in the US.

But all Greeks are suffering for it. The idea that Greek work ethic is lacking is wrong. They might have lived beyond their means, but that is no different than the US or Britain. I know private sector Spaniards and Italians - they work and many of them without 6 week vacations and "works councils" protections we have in Germany.
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