The ECB’s biggest shareholder, Germany’s Bundesbank, laid out its conditions for providing fresh support to the euro zone’s most indebted countries on Monday, after opposing such aid at an emergency meeting.
In comments published in Der Spiegel magazine on Friday Lindner’s economics adviser Lars Feld urged the ECB to attach conditions to any aid in order to promote economic reforms.
“Anyone who wants money from the central bank out of turn must be prepared to provide something in return,” Feld said.
There was no comment immediately available from the finance ministry when contacted by Reuters.
The ECB decided at the June 15 meeting to direct bond reinvestment to help euro zone countries on the bloc’s southern rim and devise a new instrument to contain divergence in borrowing costs between them.
Bundesbank chief Joachim Nagel, who disagreed with that decision according to sources at the meeting, warned against trying to decide the right market spread as that was “virtually impossible” and risked making governments complacent.
“This includes reforms supervised by independent institutions; anything else would endanger the stability of the monetary union,” Feld was quoted as saying by Der Spiegel.
Feld’s comments are unusually prescriptive advice from a German government official on policy at the independent ECB.
Lindner, of the business-friendly Free Democrats (FDP), has repeatedly pressed the ECB to tackle rising prices, saying last month that it has a responsibility to do so.
Sources have told Reuters the new instrument to buy more southern European bonds is likely to come with strings attached, such as that a country’s debt is deemed sustainable by the ECB or that it complies with the European Commission’s fiscal rules and economic recommendations.
Groups of German academics have complained about past ECB bond-buying schemes in multiple lawsuits at the constitutional court in Karlsruhe.
While their claims were ultimately rejected, the German judges have demanded that Berlin parse ECB decisions with a fine comb when they may endanger taxpayer money.
But tying the new programme with the European Commission’s recommendations or the ECB’s own assessment was still seen as less stringent and more politically palatable than the ECB’s previous rescue scheme, which required countries in distress to apply for a full-on bailout.
An ECB spokesman declined to comment.
Source: Economy - investing.com
