Published October 5, 2014
Copyright © 2014 Reuters
The ECB criticized Germany for its asset purchase plan
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by Michelle Martin
BERLIN (Reuters) – The decision by the European Central Bank to repurchase securitized loans to restart lending in the euro area goes wrong in Germany with the Bundesbank and some conservative allies of Chancellor Angela Merkel .
Thursday, after its monetary meeting in October, the ECB announced its intention to purchase loans backed by assets (asset-backed securities, or ABS) from the last quarter 2014, including from Greece and Cyprus, the two countries of the euro zone sovereign debt which is rated speculative grade (“junk”).
Jens Weidmann, the Bundesbank president, sounded load Sunday against the risk of buying “low-quality securitized loans” at high prices as part of this plan.
Banks create ABS by blending loans from diverse backgrounds estate -Loans and companies, car loans or consumption-and selling these products to insurers, pension funds and, therefore, the ECB now.
“Credit risks taken by private banks will be transferred to the central bank and thus the taxpayer without having anything in return, “laments the German central banker -member the Board of Governors of the BCE-in the columns of Focus magazine.
“This goes against the principle of accountability that is fundamental to a market economy: one that derives a profit from something must bear the loss if there is a negative development.”
The global financial crisis has shown how dangerous it was to abandon principle says Jens Weidmann
The head of the Buba also cautions against the depreciation of the euro. “Political deliberately seeking to weaken the currency can also cause against-reactions. Ultimately, there are only losers with a competitive devaluation. “
Although the ECB said to have no purpose in this regard, the euro was driven lower by the divergence of monetary policies on both sides of the Atlantic, the ECB to maintain an accommodative policy when the Fed normalizes his.
“RISK incalculable”
Also interviewed by Focus Jürgen Stark, former chief economist of the ECB sees unconventional measures announced by Mario Draghi an “act of desperation.”
In German who had resigned from the Executive Board of the ECB “hawk” 2011 by disagreeing with the strategy, the central bank yields to the pressure of France and Italy and with market expectations rather than be assertive.
The fact that the ECB gives in Paris and Rome on the weakening of the euro “shows how it is misguided,” said Stark, adding:. “There are now more taboos”
The ECB accuses t it still would take an “incalculable risk” to its balance sheet with the repurchase plan ABS and taxpayers of the eurozone would be liable for losses.
“This could have substantial redistribution effects between Member States. The ECB has no democratic legitimacy for it, “he says.
Two politicians close to Angela Merkel also criticized the new measures of the ECB.
Hans michelbach, one of the leaders of the CSU, the Bavarian wing of the CDU Chancellor, accused Mario Draghi to be transforming the ECB into a “rotten bank” (“junk bank”) with such redemptions speculative debt.
The ECB is now willing to buy the kind of “opaque debt” that is largely responsible for the global financial crisis 2007/2008 has he said Reuters Saturday.
Norbert Barthle, budget expert of the Christian Democratic Union (CDU), said about her fear should be engaged to the German taxpayer to foot the bill.
“Redistribute the risk in this way is not part of the tasks of the central bank,” he says in Focus magazine.
(With Gernot Heller, Veronique Tison for the French service)
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