MNI: BBK Wuermeling Cautions Against Changing ECB's PSPP Rules

By Christian Vits

     FRANKFURT (MNI) - Bundesbank Board member Joachim Wuermeling Wednesday

warned against changing the rules of the European Central Bank's parameters of

its Public Sector Purchase Programme.

     "Smooth implementation of the PSPP does not mean rewriting the rules

whenever compliance with the rules would impose any kind of restrictions,"

Wuermeling said in a speech in London. 

     "Abandoning the capital key as reference value or increasing the limit for

issue shares and issuers would take monetary policymakers deep into the realm of

fiscal policy -- in my view, too deep," he stressed.

     According to Wuermeling, government bond buys blur the line between

monetary and fiscal policy and have made the Bundesbank the largest creditor to

the euro area countries. "This poses a threat to our independence," he said.

     "I believe that changing the parameters - which is sometimes discussed

rather carelessly, in my opinion - would have considerable negative

repercussions," he underlined.

     If capital markets are to encourage fiscal policymakers to embrace fiscal

prudence, it is vital that market mechanisms generally continue to function

properly, Wuermeling added.

     At the same time, temporary deviations from the capital key "are not a

discretionary policy choice to support individual countries," he noted. "They

have purely technical reasons and reflect the fact that we want to be as

market-neutral as possible in our purchases."

--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com

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