FRANKFURT, germany — Debate raged on among Europe’s top bankers Monday over the merits of a proposal for the European Central Bank to buy government bonds to lower borrowing costs for financially troubled governments.
Germany’s national central bank, the Bundesbank, is increasingly isolated in its opposition to the plan, saying it would expose taxpayers to potential risks and could leave countries dependent on the financial relief as though on a drug.
Bundesbank head Jens Weidmann says bond purchases would also be too close to an outright bailout of governments, which the ECB is forbidden from doing by treaty.
The European Union treaty’s provisions are meant to prevent the ECB from printing money to cover government debts, a practice that can cause inflation and compromise the bank’s political independence. It is also meant to keep it from bailing out one member country at the expense of the others without governments having a say.
But Joerg Asmussen, the top German at the ECB and a member of the six-strong executive board, which runs the bank daily, countered that any purchases of government bonds will be carefully designed to avoid violating the treaty.
Asmussen said details were still being worked out and will be discussed at the next meeting of the bank’s governing council Sept. 6.
