German president concerned over ECB bond-buying

AP News
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Posted: Aug 24, 2011 7:58 AM
German president concerned over ECB bond-buying

Germany's president said Wednesday that he has legal concerns about the European Central Bank's drive to buy the bonds of financially weak governments, a key tool in the region's efforts to ease market tensions.

The ECB earlier this month started buying Italian and Spanish bonds to drive borrowing costs down to affordable levels _ reviving a bond-buying program that has caused unease in Germany and was publicly criticized when it was launched last year.

"I consider the massive buying of individual countries' bonds by the European Central Bank legally questionable," President Christian Wulff said in a speech in Lindau in southern Germany, according to a manuscript released by his office.

"This can't work out in the long run and can at best be tolerated on a transitional basis," he added.

The plan is for European governments' euro440 billion ($634 billion) bailout fund to get bond-buying powers, but that still requires parliaments' approval.

Wulff stressed the importance of adhering to the so-called stability pact that was meant to limit eurozone members' budget deficits, and lamented that governments are increasingly being pushed into fast decisions by markets rather than "determining how things go in the longer term."

"It gives me pause for thought when governments only show at the very last moment readiness to give up vested interests and privileges and initiate reforms," he said.

The presidency lacks political power but carries moral authority in Germany. Wulff is a member of Chancellor Angela Merkel's conservative Christian Democrats, and the prospect of repeated eurozone rescues has caused particular unease within Merkel's center-right coalition.

One of the euro's main early advocates was longtime German Chancellor Helmut Kohl, also a Christian Democrat. In an interview released Wednesday, Kohl acknowledged that mistakes were made in the past _ but said there was no alternative to helping out troubled countries.

"The mistakes with Greece were made in the past," Kohl was quoted as telling the journal Internationale Politik. "Now, in the crisis, there must be no question for us that we in the European Union and the eurozone stand by Greece in solidarity."

"The mistakes were made, they cannot be unmade _ it doesn't help to lament and it certainly doesn't help to talk the euro down," he added. "The good news is: the mistakes can be remedied, the problems can be solved."

The eurozone needs a "package of forward-looking, smart and unideological measures" to fix the problems, Kohl was quoted as saying.

"This will certainly be more expensive than (it would have been) without undesirable developments _ but we have no choice if we don't want to let Europe break apart," he added.

He said that troubled countries should get aid but, first and foremost, work to fix their own problems.