Merkel ally urges ECB not to buy strug­gling states' bonds

The Pak Banker - - COMPANIES/BOSS -

BERLIN: A se­nior mem­ber of An­gela Merkel's party warned the Euro­pean Cen­tral Bank not to pour money into Greece and other strug­gling euro zone states through bond pur­chases, say­ing this would re­duce pres­sure on them to en­act much-needed re­forms. Michael Fuchs, deputy par­lia­men­tary floor leader of the Ger­man chan­cel­lor's Christian Democrats (CDU), told Deutsch­land­funk ra­dio on Fri­day: "We shouldn't pump ex­tra money into th­ese states, but rather make sure they con­tinue along the re­form path. "I'd be grate­ful if (ECB Pres­i­dent Mario) Mr Draghi would make state­ments along th­ese lines." In an in­ter­view with Ger­man fi­nan­cial daily Han­dels­blatt pub­lished on Fri­day, Draghi urged politi­cians to im­ple­ment nec­es­sary re­forms, re­duce tax bur­dens and cut red tape to support a frag­ile euro zone re­cov­ery. He also said the risk of the cen­tral bank not ful­fill­ing its price sta­bil­ity man­date was higher now than half a year ago, and re­it­er­ated its readi­ness to act soon if needed, with gov­ern­ment bond pur­chases among the tools it could use. With the euro zone flirt­ing with de­fla­tion, fi­nan­cial mar­kets in­ter­preted Draghi's com­ments on Fri­day as strongly sug­gest­ing the ECB would soon em­bark on out­right mon­eyprint­ing, and the euro sank to a 4-1/2 year low against the dol­lar. Print­ing money to buy gov­ern­ment bonds, a mea­sure known as quan­ti­ta­tive eas­ing (QE), is seen as one of the last tools the ECB has to re­vive in­fla­tion. The bank has al­ready pushed its key in­ter­est rate down to a record low of 0.05 per­cent and doubts are grow­ing about the im­pact of ear­lier mea­sures. "I ex­pect there to be fierce dis­cus­sion over this at the next ECB meet­ing," said Fuchs, re­fer­ring to op­po­si­tion to the bond-buy­ing plan by the head of the Bun­des­bank Jens Wei­d­mann. The ECB's next pol­icy meet­ing is on Jan. 22. Fuchs has fre­quently ex­pressed frus­tra­tion felt by many Ger­man politi­cians and the pub­lic about the pace of re­form in twice-bailed-out Greece.He was quoted as say­ing in a news­pa­per in­ter­view pub­lished on Wed­nes­day that euro zone politi­cians were not obliged to res­cue Greece as the coun­try was no longer of sys­temic im­por­tance to the sin­gle cur­rency bloc. Greece holds a gen­eral elec­tion just three days after the ECB meet­ing and polls sug­gest the left-wing Syriza party, which re­jects the terms of Greece's euro zone bailouts.

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