The divide between the European Central Bank and Germany's Bundesbank apparently widened as a rumour began circulating that German central bank chief Jens Weidmann considered quitting his job in the last few weeks.
The central banker mulled resigining over the ECB's plan to start a new round of sovereign bond purchases and discussed such a move with the Bundesbank board several times in recent weeks, the German tabloid Bild reported Friday, citing unidentified sources.
Later on, Weidmann decided against resignation, partly due to pressure from the German government, the report said.
Both the German government and Bundesbank, otherwise known as Buba, declined to comment on the report. A Buba spokesperson reportedly drew attention to an interview given by Weidmann to Der Spiegel magazine that was published on August 26.
In response to a question that if he would resign, Weidmann told Der Spiegel that he could perform his task well if he remains in office. He said he wants to work to ensure that the euro remains as strong as the mark.
Eventually, if Weidmann does resign over disagreement with the ECB, it won't be a first from a German banker. Last year, his predecessor Axel Weber and former ECB Chief Economist Jurgen Stark took the same route of exit after falling out with the central bank of 17 nations over policy matters.
A fierce opponent of ECB's bond purchases, Weidmann, warned in the Der Spiegel interview that central bank financing could be "addictive like a drug" and that such a policy is too close to financing state debt by printing money. He also said he believes that he is not alone is having reservations about the bond buying plan.
The Bild report came a day after a politician from German Chancellor Angela Merkel's CDU Klaus-Peter Willsch said Weidmann would opt to resign if he failed to find support within his own country. While Buba is opposing ECB's sovereign bond purchases, Merkel has hinted at supporting the measure.
The markets are keenly looking forward to September 6, when the Governing Council meets to decide on interest rates. ECB President Mario Draghi is widely expected to unveil details of a new bond-buying scheme in the post-decision press conference.
Draghi hinted at a new bond buying plan earlier this month. It is also speculated that, under the plan, the ECB will intervene in the secondary market to buy bonds in an attempt to lower borrowing costs for troubled euro area members such as Italy and Spain.
The previous bond purchase program of ECB, known as the Securities Market Programme, or SMP, was halted earlier this year.
In an opinion piece published in the German weekly Die Zeit and released by the ECB on Wednesday, Draghi said that fulfilling ECB's mandate sometimes requires the bank to go beyond standard monetary policy tools. The bank may need to use 'exceptional measures' to communicate better sometimes, he added.
by RTT Staff Writer
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