Bundesbank lectures ECB
1 March 2012
Frankfurter Allgemeine Zeitung, Süddeutsche Zeitung
"The Bundesbank is demanding better guarantees from the ECB," concludes German daily Frankfurter Allgemeine Zeitung from a letter sent by the President of the German Central Bank to Mario Draghi, head of the European Central Bank. Jans Weidmann thus warned him of –
... the growing risk in the euro system and proposed a return to the security rules that prevailed before the financial crisis.
A view also reflected in another daily, Süddeutsche Zeitung, which says that by choosing to focus on saving the euro and not simply on regulating inflation, Mario Draghi is become a politician taking many risks. Although this policy is unquestionably favourable to the single currency by causing interest rates to fall and by stabilising the banks in the southern countries, this bailout plan is threatened by a grave danger, the paper says. As was the case with the decisions taken by the former head of the U.S. Federal Reserve, Alan Greenspan, these policies -
... introduce a lot of cheap capital which pours into a number of products and whose prices soar – at first as if by magic – to then brutally collapse. The consequences are millions of people throughout the planet lose their jobs and the banks must be bailed out with several billions of tax payer's money. Draghi's low-interest billions are creating a new financial bubble.
The only solution to avoid such a collapse would be for the ECB to withdraw this money from the circulation before it reaches and paralyses the economy. But that will not be a simple matter to arrange.