Central bank financing can be “addictive like a drug”, the president of the Bundesbank has warned, in comments that emphasize the dangerous gulf between Germany and the European Central Bank.
by Louise Armitstead, Chief Business Correspondent
Jens Weidmann argued that any radical effort to buy eurozone’s stricken sovereign bonds, as hinted by ECB president Mario Draghi three weeks ago, would be an inappropriate extension of the bank’s mandate.
“In democracies, parliaments rather than central banks should decide on such an encompassing mutualization of risks,” he said at the weekend, adding that it was not the ECB’s job to “guarantee that states remain in the euro area at all costs.”
“We shouldn’t underestimate the danger that central bank financing can become addictive like a drug. Such policy is too close to state financing via the money press for me,” he said.