The Germans see right past Draghi's attempt to tie bond purchasing with price stability. Will Germany be the one to exit the EMU?
By Rainer Buergin
Aug. 7 (Bloomberg) -- Georg Fahrenschon, president of the DSGV association of savings banks that represents more than 400 lenders, said he’s worried about the European Central Bank abandoning its mandate to keep the euro currency stable.
“What worries me is whether the European Central Bank can live up to its responsibilities,” Fahrenschon, a member of the Christian Social Union, the sister party of Chancellor Angela Merkel’s Christian Democratic Union, said today on ZDF public television. “The fact that it’s buying government bonds, that it’s flooding markets with lots of liquidity, that’s what worries me.”
The ECB has to remain independent from political influence and focus on its job of safeguarding price stability, not interfere in the fiscal policies of states, said Fahrenschon, a former finance minister in the state of Bavaria.
The ECB’s determination to reactivate its bond-buying program, announced by the bank’s President Mario Draghi last week, has prompted criticism in Germany. Former ECB Chief Economist Otmar Issing said price stability is “massively threatened,” Frankfurter Allgemeine Sonntagszeitung reported on Aug. 5. Juergen Stark, Issing’s successor who quit the ECB, said the central bank is being asked to act outside its mandate,
faces conflicts of interest and is losing its independence, the same newspaper said.
Merkel’s government backs Draghi’s proposals on bond buying to help bring down borrowing costs in Spain and Italy, her deputy spokesman Georg Streiter said yesterday.