BERLIN (MNI) – German Chancellor Angela Merkel on Monday rejected
claims by her junior coalition partner CSU that Germany’s share in the
ECB’s new bond-buying program, the OMT, is limited to the E190 billion
approved by parliament for Europe’s bailout fund ESM.

“The liability ceiling of E190 billion refers to the ESM,” Merkel
said at her traditional mid-year press conference here. “One has to
absolutely distinguish between the fiscal policy, that we as governments
undertake, and the monetary policy which the ECB makes,” she stressed.

With the OMT, the ECB is acting within its own field, the
chancellor argued. “In this field the ECB is independent,” she
underlined. “We cannot set any limits [for the ECB].”

Merkel again made clear that her government supports the OMT. “The
government has made clear that it is of the opinion that monetary policy
questions justify the recent ECB decisions,” she said. There is no
reason to doubt that the bond-buying plan is motivated by monetary
policy reasons, she insisted.

The large interest-rate differential on Eurozone sovereign bond
yields is a sign of a “systemic distortion…and a distorted monetary
policy,” the chancellor explained. “That is the reason for the ECB to
act,” she said.

Still, Merkel said she understood why Bundesbank president Jens
Weidmann had publicly criticized the OMT. “I know him, I know what’s
driving him, that we find a sustainable solution for the Eurozone
crisis,” she said. “It is very welcome that the Bundesbank head is
participating in a public debate about the euro and its future.”

At the same time, the chancellor also backed her Finance Minister
Wolfang Schaeuble who had criticized Weidmann over the weekend for his
public opposition to the OMT. “When internal discussions, which
naturally exist in the ECB, are carried to the outside, then this is not
helpful in every case,” she said.

Merkel reaffirmed her view that the debt crisis can only be
lastingly overcome by lowering public deficits and increasing
competitiveness in the Eurozone.

The chancellor said she shared the view of the Finnish central bank
governor Erkki Liikanen that “such crises last almost a decade.” She
remarked that “four to five years are already behind us, thus, there is
still some time ahead of us.” The debt crisis won’t be solved with one
big bang “but it will rather need many steps,” she reaffirmed.

Merkel said she supported Schaeuble’s view that it is unlikely that
a joint banking supervision in the Eurozone will be operable already by
the start of next year. She again stressed that there cannot be any
direct bank recapitalisation from the ESM until an European banking
supervision is fully up and running.

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

[TOPICS: M$X$$$,MGX$$$,M$$CR$,M$G$$$,M$$EC$,MT$$$$]