BERLIN (Reuters) - European Central Bank Governing Council member Jens Weidmann urged governments not to rely on the ECB to solve their problems, saying the central bank would do best by sticking to its mandate.
Weidmann, who is also the president of the Bundesbank, also called for a cap on banks’ sovereign bond holdings and a sufficient capital backing to help disentangle the close relationship between states and banks.
Speaking at an ambassadors’ meeting in Berlin, Weidmann said the crisis could not be solved with monetary policy, reiterating his opposition to the ECB’s government bond purchase program - Outright Monetary Transactions (OMT) - that has yet to be used.
“It is not a secret that I see specifically the government bond purchase programs in a critical fashion,” Weidmann said in the text of a speech.
The euro zone central banks would distribute risks stemming from unsound budgetary policy across all euro countries if they bought individual countries’ sovereign bonds with poor credit worthiness, he said.
“That way monetary policy weakens the principle of individual responsibility and engages in a kind of redistribution that should be decided by governments,” he said.
The central bank’s best contribution to solving the crisis was therefore to focus on its mandate to preserve price stability, Weidmann said.
Reporting by Annika Breidthardt, writing by Eva Taylor