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MNI INTERVIEW: Flexible ECB Bond Buys Risk Breaking German Law

Germany's constitutional court may rule against ECB efforts to buoy peripheral bond spreads, an advisor to Germany's finance minister tells MNI.

Germany’s constitutional court may rule against any attempt by the European Central Bank to use proceeds from maturing German bonds bought under its Pandemic Emergency Purchase Programme to buy debt of fiscally weaker countries, advisor to the German finance minister and former chair of the Council of Economic Experts Lars Feld told MNI.

In an interview, Feld also criticised attempts by the ECB to design a new tool to limit any blow-out in peripheral bond spreads, saying it was unacceptable for countries such as Italy to refuse to accept conditions under the existing Outright Monetary Transactions facility. The EU needs to draw in fiscal stimulus as it battles high inflation and the danger of a wage-price spiral, even as Germany’s economy is already stagnating, he said.

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Germany’s constitutional court may rule against any attempt by the European Central Bank to use proceeds from maturing German bonds bought under its Pandemic Emergency Purchase Programme to buy debt of fiscally weaker countries, advisor to the German finance minister and former chair of the Council of Economic Experts Lars Feld told MNI.

In an interview, Feld also criticised attempts by the ECB to design a new tool to limit any blow-out in peripheral bond spreads, saying it was unacceptable for countries such as Italy to refuse to accept conditions under the existing Outright Monetary Transactions facility. The EU needs to draw in fiscal stimulus as it battles high inflation and the danger of a wage-price spiral, even as Germany’s economy is already stagnating, he said.

Keep reading...Show less