Friday, August 31, 2012

Weidmann resignation report turns up heat on ECB's Draghi


German central bank chief Jens Weidmann's reported threat to resign has piled pressure on European Central Bank President Mario Draghi to assuage his opposition to a new bond-buying plan without tying it up in so many knots it is rendered ineffective.
A Bundesbank spokesman declined to comment on Friday on a report in the mass circulation Bild newspaper that Weidmann, who has stressed his opposition to the strategy, had considered resigning several times in recent weeks but had been dissuaded by the German government.
Draghi is skipping this weekend's Jackson Hole policymakers' retreat to try to forge agreement. The Italian will have little time to celebrate his 65th birthday on Monday as he tries to seal a deal before a September 6 ECB policy meeting.
The ECB is preparing to ease painful borrowing costs in Spain and Italy, in the teeth of Bundesbank opposition, to buy the euro zone governments time to negotiate legal and political hurdles to a longer-term response to the euro zone crisis.
"Opposition from Weidmann and reservations from some other Council members will mean that ECB bond purchases would be highly conditional, be focused on the short end and would not aim to bring yields down quite as much as Italy and Spain might like to see," said Berenberg economist Holger Schmieding.
Securing majority support for a plan Weidmann can live with represents the biggest balancing act Draghi has faced since he took over the ECB presidency on November 1 last year.

Read more: http://www.reuters.com/article/2012/08/31/us-eurozone-ecb-idUSBRE87U09N20120831

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