–Adds Weber quotes on government bond buying program, other measures

FRANKFURT (MNI) – The European Central Bank’s decision to buy
government bonds carries significant stability risks and those risks
must be kept as limited as possible, ECB Governing Council member Axel
Weber said in an interview with German daily Boersen-Zeitung on Monday.

The head of Germany’s Bundesbank said the central bank will ensure
that the program does not undermine its current monetary policy stance
and that it remains committed as ever to ensuring price stability.

“The purchase of government bonds bears significant stability risk,
and that is why I view this part of the ECB’s Governing Council’s
decision critically even in this extraordinary situation,” Weber said.
He thus left little doubt that he was one of the Council members
opposing the move.

President Jean-Claude Trichet made it clear earlier Monday that
there were dissenters on the Governing Council. “On some of the
decisions there was unanimity — I won’t give details — and on some
there was an overwhelming majority,” Trichet told reporters in Basel.

Weber was an obvious candidate for dissent, given his steadfast
opposition to the idea over the past months and years. “It is now
crucial to keep these risks as small as possible,” Weber told the paper.

“This is why the purchases will be very restricted: They are only
aimed at restoring the bond market and the monetary policy transmission
process. The extra liquidity injected in the process will be sterilized
by absorbtion measures,” he added.

The central bank has not published details about the scope of the
government bond buying program and has not committed to any specific
amounts later on.

“We are determined not to undermine the current direction of
monetary policy with bond purchases,” Weber said.

“The German population can trust that we will be very alert. The
Bundesbank and the entire Eurosystem stand behind price stability in the
monetary union — up until now and equally in the future,” Weber said.
He said that other support measures announced earlier today, namely the
return of several non-conventional liquidity operations, were warranted.

The situation in financial markets had “dramatically” deteriorated
ahead of the weekend, increasing the risks for “the stability and
survival of the European Monetary Union,” Weber told the paper.

Asked about the path forward, Weber said that monetary policy had
made an “exceptional contribution to crisis management.” He added that
governments must now live up to their responsibility by consolidating
public budgets and improving financial market regulation.

–Frankfurt newsroom +49 69 72 01 42; Email: jtreeck@marketnews.com

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