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Merkel: states must work with ECB on euro

The Local · 7 Sep 2012, 16:49

Published: 07 Sep 2012 14:21 GMT+02:00
Updated: 07 Sep 2012 16:49 GMT+02:00

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"The ECB made clear yesterday ... that the the future of the euro will to a large extent be determined by political action and that the conditionality is a very important aspect," Merkel said in Austria. "That is the way we have always chosen."

Finance Minister Wolfgang Schäuble said on Friday the European Central Bank (ECB) was not financing sovereign debt with its newly-announced plan to buy sovereign bonds of struggling eurozone members.

"It's not the beginning of monetary financing of sovereign debt," Schäuble told reporters in Stockholm, bashing the German media as "very nervous" in its criticism of the ECB's decision on Thursday.

At one of the most highly anticipated meetings in its history, the ECB's governing council agreed on a new programme to buy unlimited amounts of heavily indebted countries' sovereign bonds in a bid to bring down their borrowing costs.

Schäuble, who was in Stockholm for a seminar on economic growth, defended the ECB's independence, recalling that "as a finance minister, you never comment decisions of the ECB."

"We have an independent European Central Bank and we trust this central bank," he said, adding: "If the European Central Bank is a tool for policymakers, then the battle is lost."

"The ECB is responsible for monetary policy, and the mandate of the ECB is clearly limited to monetary policy. And the decision that the ECB takes is in the framework of monetary policy, nothing else. It's fine. They know very well what they have to do," he stressed.


"We have an independent European Central Bank and we trust this central bank," he said, adding: "If the European Central Bank is a tool for policymakers, then the battle is lost."

"The ECB is responsible for monetary policy, and the mandate of the ECB is clearly limited to monetary policy. And the decision that the ECB takes is in the framework of monetary policy, nothing else. It's fine. They know very well what they have to do," he stressed.

European leaders broadly welcomed the bond-buying plan but Germany's media lashed out at it, echoing the German central bank's criticism.

Schäuble accused the media of sensationalising the issue, saying: "It's good for the headlines."

He addressed sceptics who argue that the ECB risks going too far and losing control of inflation since it did not set a monetary limit on its purchases.

"There are misunderstandings ... If they announced any amount, or whatever, that would allow speculation," he said.

Story continues below…

Meanwhile, Schäuble recalled that eurozone governments had to reform their way out of the crisis, stressing the need to increase competitiveness.

"You can only overcome the crisis by solving the problems at the root... It's not a matter of not enough solidarity," he said in a response to a question about whether Germany would be ready to fork out more money to help troubled eurozone members.

He also said too much focus was being placed on the eurozone.

"Markets can only think of one problem at a time", and if the eurozone crisis were resolved, "I'm sure they would find another problem to be very worried about."


The Local (news@thelocal.de)

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Your comments about this article

15:17 September 7, 2012 by truth is treason
Remember the euro is the first currency ever to be backed by no government, no tax system, no army and no navy. It is backed only by a theory and a set of rules.

When the first country leaves will the others send their navies.

In an earlier article About the above article if the German Finance abstains on the ESM treaty that vote is consider a Yes Vote :

German Finance Minister Wolfgang Schäuble. "But will he have the backbone to vote no when everyone else is in favor?" asks Siekmann. The legal expert explains that even if Schäuble abstains, according to the treaty, it would be counted as a vote in favor. "That's unusual when a unanimous decision is required," criticizes Siekmann, "and it's problematic.
16:48 September 7, 2012 by sonriete
there is a big problem with the voting structure of this bank when a tiny and bankrupt net recipient country like Cyprus, kept afoat by cheap loans from Vladimir Putin's Russia has the same voting share as Germany, which pays the lions share of the bill when it comes.

So yesterday we saw all of the recipient club Med countries voting as a block to effectively force Germany to hand over its money against her will.
17:39 September 7, 2012 by Steve1949
All they are doing here is trying to buy time. I wonder who is going to be eating all the debt when these bonds become unredeemable? I hardly think this is going to save the Euro or the Euro crisis.
19:18 September 7, 2012 by smart2012
Hei guys, this is saving Euro and Europe, u should be happy Mario did it. Or u want to have another ww3 which u will lose again??? Stop reading BILD, it is dangerous for your jobs, future and kids.

And btw, all countries voted in favor, except one... Which one??? Stay in the corner and shut up ;)
19:38 September 7, 2012 by sonriete
They swore to us that this day would never come. They swore that the "the stability pact" had real teeth and that there would never be a "spagetti euro".

So now the day has come, the recipient conuntries have seized control and are using their majority on the ECB board to ramp up the printing presses. Is anyone suprised?

The two Mario's have turned all others against Germany, even the Dutch and the Finn's are too terrified to cross them.

The lunatics have taken over the Asylum.
20:47 September 7, 2012 by smart2012
Sonriete, why do u think all countries supported this but Germany. As all countries realized that following merkel's strategy europe (incl Germany) would end up in a disaster. Did u realize that Germany is getting into recession? Read read read read the right press, not Bild. U will become better
21:44 September 7, 2012 by sonriete
Smart2012, I don't generally look for business news in Bild. I look to the Wall Street Journal, The Financial Times and the Economist.

If you read those serious business organs you will know their editorial boards are highly sceptical about the continued viability of the Euro under any senario.

I don't think the working man readership of Bild is responsible for the huge multi billion cash outflows from the club Med banks into "safe havens", it's the most sophisticated wealthy people and institutions behind that.

In the end all this bond buying and talk of "Eurobonds" will not likely result in 2% interest rates for Spaniards, much more likely it will bring about 6% yeilds on the German debts.

AS rich as Gremans may be, 80 million Germans are not rich enough to pull up economies with hundreds of millions of people who are ridiculously indebted.

The German government has already been put on negative watch by credit agencies, by taking on all these new responsibilities we can kiss that AAA goodbye, probably sooner than later.
21:55 September 7, 2012 by IchBinKönig
Well said, sonriete.

Smart2012 is, one of, if not THE biggest idiot on this news forum. Just as every promise regarding the Euro has been broken by beaurocrats, so has every one of his predictions been dead wrong. He claims WWIII will result if the Euro fails. WWIII will happen when the people of formerly sovereign nation states rise up against the lack of democracy and the growing bureaucracy.
22:45 September 7, 2012 by smart2012
Sonriete, your comment shows how disinformed u r. All main eu economists + top CEOs of eu companies (incl german companies) wants to stick to euro, as this is the only way where Europe can compete against china/India/Russia/brazil etc etc, ie the growing economies where the money are going (not in Germany my friend, rich people in Germany represents max 5% of the total German population, and their money either are in Switzerland or invested in the growing markets above. 20% of Germans are actually poor, and this is growing mainly for old people). Stable euro will help everyone and so far the country that has benefited the most is Germany (export, east Germany unification). What draghi did is great for the stability of euro, and Germans will not pay any money for this process. Even scheuble today criticized some populistic German press.

King, u assume wrongly. I talk about ww3 nit linked to euro fall, but linked to recession and poverty in eu (incl Germany) which will fuel extremism (in Germany too) with higher risk of war.. And in Germany there is an open wound represented by the relation btw Germans and Turkish, which could be the spark
22:52 September 7, 2012 by likosmokeses
Probably smart2012 don't have realise what kind of solutions Draghi proposed.

The best option was for Merkel to exit from main screen. From now on responsible for crisis will be ECB. Good luck in ......saving euro.

BTW, eurozone CAN'T compete India, China, Russia e.t.c either with or without euro.
23:11 September 7, 2012 by smart2012
All the world has welcomed draghi's decision, only populistic German press is making a big deal.

Likosmokeses, u r right to say that it will be hard to compete with china etc, however I am sure u agree Germany with DM would even be worst. tell me, what would u recommend to do?
01:24 September 8, 2012 by sonriete
I'm not sure the whole world except for German populists agree this is a smart thing. For one thing I don't consider Axel Weber , Juergen Stark and Jens Weidmann to be populists,

As for Scheuble, I think he is so single-mindedly committed to European integration that I wonder if he's capable of thinking objectively about the Euro at this point in his career.

The rest of the world seems relieved that the whole thing is not going to blow up, at least for the next six months, this temporary measure gives an opportunity to not hear the dreary headlines so we can enjoy the holidays, the

New Year, maybe do some skiing in February and then worry again in the Spring when it will probably rear it's head again.

By then there will be be a new round of downgrades and they will start up about Eurobonds and the festivities will start again.
10:56 September 8, 2012 by smart2012
Sonriete, u r talking about bundesbank ceo's, so in effect u talk about one Entity. One against all the rest of europe and world.

I still cannot see what u propose as alternative to make Europe stable and save this nice continent..please let me know. And if u tell Germany alone, then go ahead, it will be the death of Germany, and the relief of Europe
20:40 September 8, 2012 by sonriete
Smart2012, I honestly cannot understand how you believe that other euro zone countries would benefit if Germany left and went back to the DM.

They are all benefiting from Germany's AAA rating, the 7 percent interest rates the southern countries are now paying would likely be 10% if they had not attached themselves to Germany.

As for your suggestion that Weber, Stark and Weidmann are all joined at the hip because they all worked at the Bundesbank at some point, I simply disagree with that. I mentioned them because they are all accepted as among the most eminent economists in Germany of this generation and they all agree this bond buying spree is a ruinous ipolitically motivated excersize.
13:39 September 10, 2012 by murka
Am I the only one seeing two paragraphs in the article repeating?

Otherwise very right thing - ECB should keep the current amount of Euros in the system.

The state deficits are not because somebody works less or has particularly downshifted in the last couple of years. The mass of euro money is stuck in Germany and Co. and must be carefully re-distributed.
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