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EURO CRISIS

‘ECB must buy bonds to prevent German inflation’

Germany could be hit by dreaded inflation if the European Central Bank (ECB) is prevented from buying bonds issued by countries like Italy and Spain, Italian Prime Minister Mario Monti warned on Wednesday.

'ECB must buy bonds to prevent German inflation'
Photo: DPA

Monti’s comments published in the Italian daily Il Sole 24 Ore a few hours before he was due in Berlin, argued for resuming a revamped ECB bond-purchasing programme that has been opposed by Germany’s influential central bank, the Bundesbank.

Pointing to the wide spread between the interest rate or yield, on Italian and German bonds, Monti said it could lead to a “potential rise in inflation for Germany which, I believe, doesn’t correspond to the ECB or German government’s wishes.”

The Italian premier explained that inflation could result from a substantial rise in the amount of money available within the 17-member eurozone along with low interest rates and rising bond prices.

In August, rising fuel prices pushed German inflation back up to the key level of 2.0 percent, the first time this year that inflation in Europe’s top economy has risen.

Germans are reluctant to back large-scale purchases of bonds issued by heavily-indebted eurozone partners, but Europe’s biggest economy is historically sensitive to the threat of inflation.

Monti declined to confirm that he would raise the issue with German Chancellor Angela Merkel during his visit, but told the Italian newspaper: “It’s right to stress that this is a serious imbalance for us, but it’s also a risk for those countries that today seem to benefit from it,” like Germany.

Seperately, ECB head Mario Draghi said on Wednesday the bank would always act within its mandate to ensure price stability in the euro area, but exceptional measures might be required to achieve that.

“Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools,” Draghi wrote in an editorial for German weekly Die Zeit.

The ECB is under intense pressure to don its fire-fighting helmet once again and re-launch a contested programme to buy up the sovereign bonds of debt-wracked countries and bring down their borrowing costs.

But Draghi’s German colleague on the ECB governing council, Bundesbank chief Jens Weidmann, is strongly opposed to such a move, arguing that the practice is tantamount to monetary financing, where the central bank prints money to pay off a country’s debt – something expressly forbidden under the ECB’s statutes.

In an opinion piece, to be published in on Thursday but released in advance, Draghi countered that “when markets are fragmented or influenced by fears, our monetary policy signals do not reach citizens evenly across the euro area.

“We have to fix such blockages to ensure a single monetary policy and therefore price stability for all euro area citizens,” the Italian central banker said.

“This may at times require exceptional measures. But this is our responsibility as the central bank of the euro area as a whole.”

AFP/DOW JONES/hc

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ACCIDENT

German tourists among 13 dead in Italy cable car accident

Thirteen people, including German tourists, have been killed after a cable car disconnected and fell near the summit of the Mottarone mountain near Lake Maggiore in northern Italy.

German tourists among 13 dead in Italy cable car accident
The local emergency services published this photograph of the wreckage. Photo: Vigili del Fuoco

The accident was announced by Italy’s national fire and rescue service, Vigili del Fuoco, at 13.50 on Sunday, with the agency saying over Twitter that a helicopter from the nearby town of Varese was on the scene. 

Italy’s National Alpine and Speleological Rescue Corps confirmed that there were 13 victims and two seriously injured people.

Italian daily Corriere della Sera reported that German tourists were among the 13 victims.

According to their report, there were 15 passengers inside the car — which can hold 35 people — at the time a cable snapped, sending it tumbling into the forest below. Two seriously injured children, aged nine and five, were airlifted to hospital in Turin. 

The cable car takes tourists and locals from Stresa, a resort town on Lake Maggiore up to a panoramic peak on the Mottarone mountain, reaching some 1,500m above sea level. 

According to the newspaper, the car had been on its way from the lake to the mountain when the accident happened, with rescue operations complicated by the remote forest location where the car landed. 

The cable car had reopened on April 24th after the end of the second lockdown, and had undergone extensive renovations and refurbishments in 2016, which involved the cable undergoing magnetic particle inspection (MPI) to search for any defects. 

Prime Minister Mario Draghi said on Twitter that he expressed his “condolences to the families of the victims, with special thoughts for the seriously injured children and their families”.

Infrastructure Minister Enrico Giovannini told Italy’s Tg1 a commission of inquiry would be established, according to Corriere della Sera: “Our thoughts go out to those involved. The Ministry has initiated procedures to set up a commission and initiate checks on the controls carried out on the infrastructure.”

“Tomorrow morning I will be in Stresa on Lake Maggiore to meet the prefect and other authorities to decide what to do,” he said.

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