FRANKFURT (MNI) – A purported proposal by Italy’s Prime Minister
Mario Monti for the European Central Bank to buy the sovereign bonds of
Spain and Italy with a guarantee from the European bailout fund would
undermine monetary union, ECB Governing Council member Jens Weidmann
said in an interview released Saturday.
Weidmann, who heads the Bundesbank, told German daily Sueddeutsche
Zeitung that Monti’s proposal for Italy to get money from the bailout
fund without conditionality “amounts to the financing of government via
the printing press, which is forbidden by the EU treaties.”
Weidmann rejected the idea as an attempt to “make use of monetary
policy so as to limit the financing costs of member countries and
circumvent market mechanisms to a large degree.”
“In this way there would be extensive joint liability and the
framework of monetary union would be undermined,” he said.
It is not quite clear what Monti’s government actually proposed.
Last week, one of his closest aides, Italy’s European Affairs Minister
Enzo Moavero, raised the possibility of an automatic mechanism that
would trigger bond purchases by the ECB or the rescue fund or “other
financial institutions.”
At the G-20 summit in Mexico later in the week, Monti more or less
confirmed the plan but said the purchases would be conducted by the
bailout fund, not the ECB.
–Frankfurt bureau tel.: +49-69-720-142. Email: dbarwick@marketnews.com
[TOPICS: M$X$$$,MT$$$$,MGX$$$,M$$CR$,M$$I$$,M$$S$$,M$$EC$]
