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No to ECB buying member states' bonds

Aug 26 2012 14:33 AFP

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Berlin - German central bank chief Jens Weidmann criticised as dangerous any plan by the European Central Bank (ECB) to buy member states' bonds, according to Monday's edition of Spiegel magazine.

In early August, the ECB suggested it could start unlimited buying of stricken member states' bonds to drive down their crippling borrowing costs, following trouble in Spain and Italy.

The ECB "may undertake outright open market operations of a size adequate to reach its objective," its chief Mario Draghi said.

"For me such a policy comes close to financing states with the printing press," Weidmann told the magazine. "In a democracy, it should be the parliaments and not the central banks that decide such a sharing of risks."

"The manna from central banks will forever sharpen greed," the Bundesbank chief said. "One should not underestimate the danger that financing by central banks can get one hooked like a drug."

Draghi is due to say more about new measures to fight the sovereign debt crisis on September 6, during his monthly press conference in Frankfurt, which follows a meeting of ECB governors and a decision on key interest rates.

The ECB already has an instrument to buy bonds of member states on the secondary market, where they change hands once they have been issued, but it has not been used for several months.

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