German minister: Don't let up on reforms

AP News
Posted: Sep 08, 2012 8:33 AM
German minister: Don't let up on reforms

BERLIN (AP) — Germany's finance minister is insisting that countries must not use the European Central Bank's plan to buy unlimited amounts of government bonds as an excuse to let up on economic reforms and deficit-cutting.

The ECB announced its most ambitious plan yet to ease Europe's financial crisis on Thursday. The bond purchases would help lower borrowing costs for countries struggling to manage debts.

The head of Germany's central bank has objected, arguing that the ECB is moving too far toward financing government deficits — which is prohibited by the European Union treaty. Senior government officials have signaled their acceptance, however, while making clear that the decision doesn't change the path struggling countries need to take.

"We will only overcome the euro's crisis of confidence if we do not let up on reforms," Finance Minister Wolfgang Schaeuble was quoted Saturday as telling the Bild am Sonntag newspaper.

"It would be a serious mistake if the ECB decision were misinterpreted in the sense that we could now let up on our efforts," he added. "The opposite is the case."

The ECB's pledge of support came with strings attached: countries that want the central bank to help with their borrowing costs must first ask the 17-nation eurozone's existing bailout funds to buy their bonds. The ECB also wants the International Monetary Fund to be involved.

Even so, the prospect of unlimited bond-buying, whatever the conditions, has drawn criticism from commentators and some lawmakers in Germany.

"The ECB has in the past always kept to its mandate and I assume it will do so in the future, too," Schaeuble countered, according to Bild am Sonntag. "One thing is clear: monetary policy must not serve to finance states. That line must not be crossed."

As for the purchases' unlimited nature, "it seems obvious to me that the ECB cannot name any upper limits without positively challenging speculators," he added.

Asked about the possibility that having to fulfill new conditions might make countries reluctant to seek help, ECB executive board member Benoit Coeure underlined in an interview with France Inter radio the bank's desire that "the conditions be in place for our policies to be efficient."

"That doesn't necessarily mean more austerity," Coeure said. "These countries have, as we know, already taken a lot of measures that go in the right direction, so there will not necessarily be additional demands."