THE TELEGRAPH: The European Central Bank risks irreparable damage to its reputation by agreeing to the mass purchases of southern European bonds in defiance of the German Bundesbank and apparently under orders from EU leaders.
Jean-Claude Trichet, the ECB's president, denied there had been any political interference. "We are fiercely and totally independent," he said.
It is clear, however, that the two German members of the ECB's council voted against the move, a revelation that may cause a catastrophic political backlash in Germany.
Axel Weber, ultra-hawkish head of the Bundesbank, told Boersen-Zeitung that the emergency move over the weekend had been a mistake. "The purchase of government bonds poses significant stability risks and that's why I'm critical of this part of the ECB's council's decision, even in this extraordinary situation," he said. The rebuke is devastating. The ECB draws it authority from the legacy and aura of the Bundesbank.
The European Commission made matters worse by announcing the decision in the small hours of Monday morning before the ECB had spoken, fuelling suspicions that monetary policy is being dictated by the political authorities. French President Nicolas Sarkozy further enraged Berlin by claiming that 95pc of the $1 trillion "shock and awe" rescue package was based on French proposals.
"Germans are watching this in horror," said Hans Redecker, currency chief at BNP Paribas. "If this ends up in full-blown quantitative easing, people are going to be up in arms." >>> Ambrose Evans-Pritchard | Tuesday, May 11, 2010
