EU praises ECB move, Bundesbank pans it
September 8, 2012, 12:03 am TWN
PARIS -- European leaders broadly welcomed a new plan from the European Central Bank on Thursday to help eurozone members hit by crippling borrowing costs, but it drew scathing criticism from Germany's Bundesbank.
At one of the most highly anticipated meetings in its history, the ECB's governing council agreed on a new program to buy unlimited amounts of heavily indebted countries' sovereign bonds in a bid to bring down their borrowing costs.
As news of the ECB's new master plan sent stock markets across Europe higher and Spanish and Italian borrowing costs tumbling, praise poured in from across the continent — with the conspicuous exception of its largest economy.
British Prime Minister David Cameron and French President Francois Hollande, who had been holding talks in London, both welcomed news of the scheme, dubbed "Outright Monetary Transactions" or OMTs.
"I have said for two years now that we need an ECB that stands firmly and squarely behind the currency of the euro and that is prepared not just to make those statements, but to back those statements with real financial muscle and a clear plan," Cameron said.
"I warmly welcome that those steps were taken. It's clearly important for the countries in the eurozone but also important for countries like Britain."
Italian Premier Mario Monti, whose country has been punished by investors worried it is at risk from debt crisis contagion, called the plan an "important step forward" for the eurozone.
Monti said the problem of soaring borrowing costs was not Italy's alone but was threatening the entire eurozone, making "common intervention necessary."
"From today there are possibilities in the EU which can be used to address these problems," he said.
EU economy chief Olli Rehn said the move "should help restore investor confidence," but warned that governments of vulnerable eurozone states "must continue to take determined action for sound public finances and sustainable growth and job creation."
The International Monetary Fund also greeted the plan warmly, saying it would lend its support within its own rules.
"We see the ECB's action as an important step toward strengthening stability and growth in the euro area," said IMF managing director Christine Lagarde.
But Germany's central bank — whose chief has been outspoken in his opposition to bond-buying measures — lashed out at the plan.
"In the most recent discussions, as before, Bundesbank President Jens Weidmann reiterated his frequently substantiated critical stance towards the purchase of government bonds by the eurosystem," the central bank said.
German Chancellor Angela Merkel had a tight-lipped reaction, declining to comment except to say the ECB was acting within its mandate.
"The ECB acts within its independence and within its mandate and is responsible for the stability of the currency, the value of the currency, and to take the appropriate decisions," she said.
Other leaders also rushed to underline that the ECB was playing by the rules.
France's Hollande said the ECB had "acted in line with the mandate it has been given" to "safeguard growth in Europe."
European Commission head Jose Manuel Barroso, who gave a joint press conference with Italy's Monti before the two held talks, said he believed the ECB was "acting fully within its mandate to maintain the integrity of the monetary policy."
But it appeared Germany was unconvinced by arguments for the plan.
ECB chief Mario Draghi coyly noted the program had not won unanimous support from the bank's governing council, which includes Weidmann.
"There was one dissenting view," Draghi told reporters. "I will leave you to guess who that was."