Germany's central bank on Monday reiterated its opposition to the European Central Bank's plan to purchase government bonds.
The decision to share solvency risks should be taken by governments, and not by central banks, Bundesbank said in its latest monthly report. The comments came after a German magazine report that the European Central Bank may be planning to cap the yields on the bonds of the peripheral nations.
The ECB is considering setting limits on yields of Eurozone sovereign bonds, Germany's Der Spiegel magazine reported over the weekend. According to the magazine, the central bank will intervene and buy the bonds if their interest rates exceed a pre-determined threshold above German bonds.
Bundesbank sticks to the opinion that the government bond purchases by the Eurosystem are to be seen critically and entail significant stability risks, the central bank report said.
The report helped to push top European shares higher by mid-morning. Also, Spanish and Italian 10-year bond yields declined notably today.
However, the ECB reportedly rejected such speculation. The central bank said reports about the plan to cap borrowing costs is misleading. Such a decision has not yet been taken.
Further, Bundesbank said a comprehensive responsibility of the ECB for banking supervision will possibly creates a risk of conflict with the primary goals of monetary policy and price stability.
Meanwhile, European Central Bank Executive Board member Joerg Asmussen said a Greek exit from the euro area would be manageable, but would be expensive.
In an interview with the Frankfurter Rundschau, the German economist said Bundesbank is not isolated in Europe and "no one should try to create the impression that the Bundesbank or its president is isolated."
by RTT Staff Writer
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