ECB showdown on bond-buying plan THIS WEEK
31.08.12 @ 19:17
BRUSSELS - A keenly-awaited meeting of the European Central Bank board on Thursday (6 September) will have to reconcile a bond-buying plan aimed at helping Spain and Italy with the fundamental opposition to such schemes within Germany's Bundesbank.
Ahead of the Thursday meeting of eurozone central bankers within the ECB board, Bundesbank chief Jens Weidmann told Der Spiegel that the ECB actions risk becoming "addictive like a drug" allowing governments to give up necessary reforms.
Adding to the pressure, Bild newspaper on Friday quoted unnamed sources saying Weidmann had considered resigning - just like two of his predecessors - over the ECB plans to buy Spanish and Italian bonds. The measure is aimed at helping them lower their borrowing costs, which have reached bailout territory.
ECB chief Mario Draghi defended his stance in German newspaper Die Zeit by saying that in order to keep the euro stable the central bank sometimes has to go "beyond" its standard policies and adopt "exceptional measures."
A compromise solution has been in the works for the past month, whereby countries that want the ECB to buy their bonds first have to sign up to a reform programme with the eurozone bailout fund. The details of such arrangements are expected on Thursday. Spain may file an official request soon afterwards.
Ahead of the Frankfurt showdown, Draghi is meeting MEPs in the economics committee on Monday, but the gathering is behind closed doors.
Economics commissioner Olli Rehn and his colleague in charge of financial services, Michel Barnier, are to appear in a public session later that afternoon and take questions on plans to give the ECB supervisory powers over 6,000 banks in the eurozone.
Rehn is also likely to be asked about Greece, as the troika of international lenders is returning to Athens this week to check on the €11.5 billion worth of spending cuts required for the next tranche of bailout money to be disbursed.
Also on Monday, MEPs in the home affairs committee will vote on a deal struck with member states to restrict access to chemicals that can be used to make home-made explosives.
Meanwhile, EU council chief Herman Van Rompuy, who is drafting the plan on how to upgrade the eurozone to a true fiscal and political union, is due to travel to Germany, France, Italy and Greece.
An initial draft was already discussed in June, with leaders expecting more details by October on the reforms feasible in the short term. The parts which will require changes to the EU treaty will be tabled at a December summit.