Germany has formally rejected the plans of the European Central Bank (ECB) president, Mario Draghi, to buy sovereign paper, which could range into the tens of billions of dollars, to bring down borrowing costs of the eurozone’s most financial troubled nations.
The Bundesbank continues to stress the case that the central bank should not try to control the mechanism to solve the region’s problems. It represents the German opinion that the problems of weak countries must be solved by those countries as they set austerity budgets that make them worthy of bailout dollars. Bundesbank officials say that bond buying to bring down interest rates only prolongs the period before countries like Spain and Italy have to reckon with falling gross domestic product, deficits and high national debt.
The international capital markets may see the ECB move for what it probably is: a very temporary and unsustainable solution.
Douglas A. McIntyre
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