FRANKFURT--Germany's central-bank chief Jens Weidmann criticized
the European Central Bank's new measures to stimulate Europe's weak
economy and boost inflation, according to a media report on
Sunday.
In an interview with German weekly Der Spiegel, the Bundesbank
president was particularly critical of the September announcement
by the ECB to buy bundled bank loans known as asset-backed
securities.
The ABS program, which is expected to kick off in October, forms
part of ECB efforts to improve the supply of credit in the euro
zone. In an ABS, banks bundle loans they have made to companies or
households, which can then be sold to other investors.
"Depending on how the ABS-purchase program is designed, there is
a danger that banks could be exempt from risks at the expense of
taxpayers," Mr. Weidmann said. That is why it is essential, "[the
central bank] accepts no significant risks of individual financial
institutions or countries," he said.
Mr. Weidmann is an ECB Governing Council member.
If the ECB buys anything at all, Mr. Weidmann said, it should
only buy low-risk securities. But it is "questionable" whether
there are enough of these in circulation for the central bank to
reach its purchase targets, he said.
In addition to the ABS program, the euro zone's central bank in
September cut three main interest rates. ECB President Mario Draghi
also suggested quantitative easing is still on the table. The
measures are aimed at boosting inflation, which at an annual rate
of 0.3% in August, is far below the ECB's target of a little below
2% over the medium term. The figure for August was revised upward
to 0.4% but the annual rate of inflation in the euro zone still
remained at the lowest level since Oct 2009.
Mr. Weidmann, who is known for his criticism of the ECB, said
the package of measures represents a fundamental strategy and a
drastic change for ECB monetary policy.
"Regardless of one's stance on the content of the measures, the
majority of the ECB governing council has, through their decisions,
signalized that monetary policy is ready to go very far and to
enter new territory," he said.
But massive central-bank purchases of government bonds only
address the symptoms of the economic crisis and don't heal the root
causes, Mr. Weidmann said.
The ECB's balance sheet has been shrinking in recent years, but
other major central banks such as the Federal Reserve and the Bank
of Japan have been expanding theirs through large-scale purchases
of public and private debt, a policy known as quantitative
easing.
Analysts have said the ECB could follow suit if its new loan
program fails to help stimulate demand for goods and services and
thereby also fails to raise annual inflation.
Write to priority.frankfurt@dowjones.com
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