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Firewalls, ECB action cannot replace reforms -Bundesbanker
November 9, 2012 / 10:16 AM / in 5 years

Firewalls, ECB action cannot replace reforms -Bundesbanker

FRANKFURT, Nov 9 (Reuters) - Countries and banks alike have to reform to untangle their interdependence and should not rely on actions from the European Central Bank or euro zone’s rescue fund to regain investors’ trust, a Bundesbank board member said on Friday.

The negative feedback loop between indebted governments and troubled banks added to the worsening of the sovereign debt crisis and plans like the one for a euro zone banking union aim to weaken this link.

Bundesbank board member Andreas Dombret said in the text of a speech to be given at a banking conference that economic as well as balance sheet adjustments and structural reforms were needed as well.

“Government bond purchases increase dependencies and firewalls are no substitution for regaining financial solvency and investor confidence,” Dombret said in a text of a speech.

“There is no way around reforms and adjustments,” he added.

Dombret reiterated that under a banking union only future risks could be dealt with jointly, not banks’ problems from the past. (Reporting by Eva Kuehnen)

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