Yields on spanish bonds in particular fell on monday. The euro-crisis countries spain and italy have only been able to obtain new money on the markets at high interest rates for months now. The bundesbank reiterates its criticism of ECB bond purchases.
The ECB itself rejected a "spiegel" report as "misleading", according to which the watchdogs are considering setting interest rate ceilings for each country in the future for purchases of government bonds of highly indebted euro countries. The issue has not yet been discussed in the ECB’s governing council, and there has been no decision, said a spokesman for the central bank in frankfurt. The ECB will continue to act strictly within the scope of its mandate – and that prohibits, for example, the financing of sovereign debt via the financial press.
According to "spiegel," the central bank would buy government bonds from crisis-hit countries whenever their yields exceeded a certain level compared with those of german government bonds.
According to a finance ministry spokesman, the federal government has no knowledge of any plans for such a shield. In purely theoretical and abstract terms, such an instrument would certainly be very problematic, said spokesman martin kotthaus.
The report nevertheless eased tensions on the bond markets. The interest rate for benchmark spanish bonds with a maturity of ten years dropped significantly by 0.16 percentage points to 6.19 percent. Yields thus moved further away from the critical long-term level of seven percent, which has been exceeded several times in recent months. In the case of italian bonds, on the other hand, the easing did not last long.
The deutsche bundesbank reiterated its criticism of ECB bond purchases. The central bank maintains its view "that government bond purchases by the euro system in particular are to be assessed critically and are associated not least with considerable risks to stability policy," the latest bundesbank monthly report said.
At the beginning of august, the ECB signaled that it would again buy bonds from euro crisis countries under certain conditions in order to print risk premiums. Bundesbank president jens weidmann voted against central bank head mario draghi’s plan in the ECB’s governing council. The bundesbank criticizes the purchases as an inadmissible attempt to finance states with monetary policy funds.
ECB executive board member jorg asmussen, on the other hand, defended draghi’s course. The new bond-buying program is compatible with the central bank’s mandate, asmussen told the "frankfurter rundschau" (monday). "We are acting within our mandate, which is primarily aimed at guaranteeing price stability in the medium term for the euro area as a whole"."Only a truth that there is no doubt about can be stable. "It is precisely these doubts about the existence of the euro that we want to remove from market participants."
According to luder gerken, chairman of the freiburg center for european politics (CEP), buying government bonds is not a way out of the debt crisis. "The ECB cannot solve the problems that have led to the euro debt crisis and the balance of payments crisis," said gerken in an interview with the information service dpa insight EU. The central bank can at best gain time.