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ECB 'could oppose Germany and buy bonds'

The Local · 2 Aug 2012, 17:07

Published: 02 Aug 2012 17:07 GMT+02:00

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Draghi said the ECB would gear up to buy Italian and Spanish bonds on the open market - but would only act after eurozone governments activate bailout funds to do the same.

So far Germany has remained mum on Draghi's "possible bond-buying" statement - an option it has vehemently objected to in the past.

Draghi said all 23 members of the Governing Council endorsed Thursday’s statement with one exception – a reference to Bundesbank president Jens Weidmann.

“It’s clear and it’s known that (Germany’s) Bundesbank have their reservations about the programme of buying bonds. The idea is we now have the guidance, the monetary policy committee, the risk committee and the markets committee will work on this guidance and then (we) will take a final decision and the votes will be counted.”

Draghi's wording implied he may be prepared to outvote the Germany if necessary.

The markets were unimpressed by Draghi's announcement, having anticipated a more concrete measure. He had raised expectations to fever pitch with a vow last week to do "whatever it takes" to preserve the embattled single currency.

In addition to his promise to intervene possibly on the bond markets, Draghi stepped up his verbal rhetoric, warning traders that speculating against the euro was a lost cause.

Reiterating that the euro was "irreversible", he said: "It's pointless to bet against the euro."

But he failed to back up his talk with action, analysts complained.

"The ECB did not change its monetary policy nor did it provide us with details about possible future actions," complained Alexandra Estiot, analyst at BNP Paribas.

"Stress on sovereign debt markets has to be addressed and the ECB could help. But once more, the ECB threw the ball back in the politicians' court," she said.

Story continues below…

The euro fell to $1.22, after briefly topping $1.24, its highest rate since June 5.

Earlier in the day, the ECB said it would keep interest rates unchanged at 0.75 percent.

The Local/afp/sh

The Local (news@thelocal.de)

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Your comments about this article

18:43 August 2, 2012 by cheeba
Unbelievable. One obvious reason the German government is opposed is the constitutional court and the questions of the constitutionality of what these funds are proposing. It is almost as though they are threatening to force Germany to leave the euro zone??!! Perhaps Germany will be forced to join the pound sterling zone...the Dutch, Irish and Austrians would probably follow
19:02 August 2, 2012 by smart2012
22 are ok, 1 not. And cheeba u really believe germany is right???? Man, open your eyes, otherwise disaster for all countries and ww3
19:19 August 2, 2012 by cheeba
So the Germans should disregard their constitution? The court ruling is not even expected until mid September and already these people are salivating for the bond purchases, and then naturally eurobonds next. Never a good idea to disregard and outvote those who are the ones paying the bills. The UK has stayed out of this expensive endeavor and it has not resulted in any war. In fact they have even strengthened their position as the real financial capital of the EU . All of the good paying finance jobs worth billions every year have migrated there while Frankfurt has declined into a backwater. 20 years ago Frankfurt rivaled London, now we have back office clerks and ECB functionaries. Even the main German banks have moved all of their significant profit centers to London.
19:33 August 2, 2012 by smart2012
Cheeba, do u leave in a different world? Uk doing well? U r kidding right? Uk is in recession, Cameron is lost, unemployment rate high. Remember, uk has one strenght ie USA in the back, which Germany will never have. Germany w/o euro will collapse, read please, even German economists and CEOs say it
19:57 August 2, 2012 by pamela7775
It seems all EU or EU related sites are infested with British voters of UKIP who are telling lies about the union and spread disaster scenarios for the Euro.

Smart2012 is perfectly right for Britain, the country which its industrial sector represents just 12% GVA(Gross Value Added).... the Economy here is in Shambles and the Tories do nothing but use Euro-bashing to cover their mistakes on the economy. The city of London became the financial centre of Europe after the 90s when all the EU countries opened their capital markets as part of the Euro project. The German constitution has nothing to do with the ECB question. The ESM is under review from the court and the decision will announced on the 12th of September. The ECB was designed in Germany by the European Monetary Instiitute and its design has made the Euro a reserve currency. Now the Tories in the UK hate the EU.... and continental Europeans dont know how much the Tories hate the EU...We have never seen sth like that ever before. Now the UK as Timothy Geithner said on the 30th of July (BBC4 interview) used the so called 'light touch approach' to attract business from New York, Paris and Frankfurt so cheeba the UKIPer doesnt know a thing about his country. The UK along with the US actually want to kill the Euro and they are using their media and governments to achieve that....
20:41 August 2, 2012 by cheeba

I am amazed at your post. I am not British, nor am I a supporter of the racist UKIP. I can only say you have a very vivid imagination. I am a German national of Lebanese origin. I came to this country as a war refugee and have lived in Bonn for the past 22 years.

Your suggestion that I am a supporter of a political movement that considers me, because of my race subhuman is particurlarly galling and hurtfull.

You are quite wrong in writing that the ECB question has nothing to do with the German constitution. In todays statement the ECB stated that their bond buying project was subject to the ESM being up and running. The German constitutional court may very well rule against the ESM in which case we will be back to the drawing board.

Because someone disagrees with you on the euro does not mean that they hate it.

All of the recent polls show a majority of Germans wishing to leave the euro, at the beginning two thirds did not want it, even now all these years later a clear majority still feels that way.

I don't see anything wrong with a country modifying its laws to attract business, countries all over the world do it all the time, I can't imagine why you would see anything wrong with that, it is just smart thinking and legislating.
15:06 August 3, 2012 by lenny van
Please don't frighten me anymore, cheeba, by suggesting that Germany and Austria would ever join the U.K. in a pound sterling monetary zone or any other kind of union. I would give up my British passport immediately if there was ever a chance of that happening. Also, it is a great insult to the heros of the Battle of Britain who gave their lives to keep the Germans out. Your tongue-in-cheek statement, however, suggests another option that no one seems to have considered. How about if all of the countries in the EU, except Germany and Austria, leave the EU together and form a free trade zone without Germany and Austria. It would allow unrestricted freedom of movement of labour and capital, endorse common standards of production and education, promote the continued use of English as the world's second language, build a common defence force and create a united federal bank that would finance the defence force, federal unemployement, medical and old age benefits and any project swithin the union, that has been passed by a democratically elected " economic" parliament (such as space exploration, foreign aid, federal highways, etc.) The federal bank would print and use a common currency a common currency that could be exchanged at any time for any of the national currencies at the prevailing rate of exchange. The Euro, used in future only by the Germans and Austrians, would immediately double in value and instantly make the people in the German speaking countries very rich, They would be so deliriously happy to have so much money, that they wouldn't notice or even care that they, as well as other money worshipping countries like the United States, would have to apply for visas to visit the rest of European countries in the new union. These visas would be very restrictive and hard to get, which would make the people in the rest of Europe happy, even though they would be a bit poorer, They would also feel more secure, because their new union would also act as a defence treaty against the countries who have been so militarily aggressive in the past.
16:32 August 3, 2012 by cheeba
@lenny van,

sounds like great fun, the problem is you are leaving the British in your new EU, and they would veto most of what you propose.
17:53 August 3, 2012 by smart2012
Cheeba, this is not great fun, what Lenny van says about Germany leaving Euro is correct. If Germany would go (maybe with Austria), this would be the best for the Euro (as it is managed today by Merkel). And Germany would lose all his export due to too high currency... Which means Germany will collapse. That is why germany DOES NOT WANT TO LEAVE EURO, they are just playing the game "WE ARE THE BEST, YOU OTHER COUNTRIES ARE CRAP", which if you look at history it will lead to a disaster. And my friend, keep in mind that more and more extremism is growing in Germany, so for me and you we need to start thinking to get out of here IF FRAU MERKEL is not finally ac ting like a politician rather than a puppet of Deutsche Bank and Bundes Bank...
09:19 August 5, 2012 by AlexR
@ cheeba

"Perhaps Germany will be forced to join the pound sterling zone...the Dutch, Irish and Austrians would probably follow"

One short phrase, too many mistakes. But that doesn't surprise me given your older ignorant comments, e.g., about West Germany paying the costs of East Germany "all of its own" or about Luxembourg that declined to participate on the "Solidarity tax", a *German* tax.

First, what "pound sterling zone"? There is not such a zone. The British pound is the national currency of one nation, not of many nations. There was a sterling area that came into existence at the outbreak of World War II and was diminished later.

Second, where did you get the idea that the British want to make their pound a currency of a "pound sterling zone" or that the "Germans, Dutch, Irish and Austrians" will be "forced to follow"? Even science fiction novels didn't ever dare to suggest that.

Third, the "Irish will follow a pound sterling zone"? Are you even aware that Ireland is a member of the PIIGS? Are you aware that was the second country after Greece, that received a bailout package from EU/ECB/IMF and effectively its economy is governed by them? Ireland cannot be a member of any new monetary union as long as its economy is in shambles.
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