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"Hard reforms" a condition for ECB bond buys: Asmussen
European Central Bank (ECB) Executive Board member Joerg Asmussen smiles during an interview with Reuters in Berlin June 19, 2012.
Credit: Reuters/Pawel Kopczynski
BERLIN |
BERLIN (Reuters) - The European Central Bank will only buy a euro zone country's sovereign bonds if it commits to "hard reforms", ECB policymaker Joerg Asmussen said on Friday, seeking to soothe German concerns that the central bank is embarking on a risky new strategy.
German media attacked the ECB's agreement on Thursday to launch a new and potentially unlimited bond-buying program to lower struggling euro zone countries' borrowing costs and draw a line under the debt crisis, with mass-selling daily Bild running a headline on Friday reading: "Blank cheque for debt states".
Asmussen, a former deputy German finance minister, took to the airwaves early to stress the conditions tied to the plan.
"(Bond buying) will only take place when the country undertakes tough reform measures. That is a necessary precondition for the ECB to act," he told Inforadio rbb.
"We will do our part, within our mandate," he added, with reference to the ECB's core task of delivering stable prices - a perennial preoccupation in Germany.
The ECB was hurt last year when it bought Italian and Spanish bonds, only for Italy's then-prime minister, Silvio Berlusconi, to go back on the reform promises he had made to get the ECB to step in just days after he made the commitments.
Asmussen said ECB bond purchases - aimed at repairing malfunctioning monetary policy in the euro zone - could not substitute for the reforms government must pursue to shape up their economies.
"They can only take place when the affected country commits itself to hard reforms. This is an imperative, a necessary prerequisite for our function," he said.
"We must avoid decreasing pressure on the states concerned to implement reforms on their budgets, bolster competitiveness or getting banks' balance sheets in order," he added.
(Reporting by Christian Goetz; Writing by Victoria Bryan and Paul Carrel; Editing by Hugh Lawson)
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Merkel, Asmussen and Schaeuble are all acolytes in the cult. The problem they are encountering is how to save the euro with German money without the German public realizing what they are up to.
After digesting the ECB’s print-to-finance plan, the German press came down hard against it. Today, Asmussen started the spin to convince the German people that this will not cost them dearly.
The political cover that the ECB is using is that financing failing governments is within the scope of monetary policy. Asmussen repeats this talking point, but the print-to-finance plan has nothing to do with monetary policy.
Each country in Europe is experiencing a different part of the business cycle, so it requires a different price for money, also known as the interest rate. The problem with having a currency union with one central bank is that you get one interest rate for Germany, which is still growing, and Greece and Spain, which are in the midst of depressions.
Buying bonds of cash-strapped countries will not make a difference in rates. What would make a difference is each country reverting to a national currency, but that option is off the table due to the cult of the euro. J.P. Morgan said that people have a good reason for doing something and the real reason. The good reason here has to do with monetary policy, but the real reason is to keep the political aspirations of the cult of the euro on track.
Asmussen points out that aid will come with strings attached and talks of tough conditions. He does not mention that Greece is receiving aid, and the tough conditions are causing a depression not to mention a great deal of resentment. German chancellor Merkel routinely appears in Greek political cartoons festooned with a certain mustache.
By the way, Greece will need either more aid or will default on the bailout it received in March, and the cult of the euro seems determined to throw more money at the PIIGS in order to support the euro. The German public is beginning to realize that they are paying for the political ambitions of their leaders by throwing their money down a black hole located just south.
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