–Weidmann: See More Efficient Instruments Than Bond Buys
–Weidmann: Strictly Oppose Idea Of Bank Licence For EFSF
–EFSF Regling: See No Risk Of EFSF Rating Downgrade

BERLIN (MNI) – European Central Bank Governing Council member Jens
Weidmann on Monday reaffirmed his criticism of the purchases of
sovereign bonds of indebted Eurozone states on secondary markets.

“Bond purchases by central banks have to be seen especially
critically because they blur the border between monetary and fiscal
policy,” Weidmann, who is president of the Bundesbank, said in a hearing
in the German parliament.

Weidmann argued that the EU-IMF loans to the highly indebted
Eurozone states are more efficient instruments than bond purchases
either by the ECB or the European Financial Stability Facility (EFSF).
“I would advise to focus on other instruments … there are more
efficient measures than bond buys on secondary markets,” he argued.

He reaffirmed his stance that Greece should not get any more
payments if it does not meet the agreed consolidation and reform goals.

Yet, the central banker refused to detail what the consequences of
a Greek default would be. “Nobody will be able to give you a reliable
scenario,” he said, adding that it will be in any case “a relatively
uncomfortable scenario” for Greece and the rest of the Eurozone.

Weidmann strictly rejected the idea that the EFSF should get a bank
licence to refinance itself via the ECB. This would be “very dangerous,”
because it would mean a de facto monetarisation of public debt.

EFSF chief executive Klaus Regling said at the same hearing that
the triple-A rating of the rescue fund is currently not in question.
Regling said he does not expect that one of the triple-A countries
backing the fund could be downgraded, “insofar there is also no danger”
that the EFSF could be downgraded, he reasoned.

Regling said he also does not see the risk that the planned
increase of the legal rights of the German parliament to approve aid
measures could prompt a downgrade of the EFSF.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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