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Draghi defends bond-buying plan

September 3, 2012

The president of the European Central Bank used a closed-door meeting with EU lawmakers to defend plans to restart a program that would buy sovereign debt in order to lower borrowing costs for some eurozone countries.

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ECB headquarters in Frankfurt
Image: dapd

Jean-Paul Gauzes, a member of the European Parliament from France said following Monday's meeting in Brussels that Draghi had denied that the program amounted to printing money.

"He considers that buying medium-term bonds of three years on the secondary markets is not money creation, since in effect those debts will be due very quickly and the funds will be put back into the circuit," Gauzes told the DPA news agency.

Germany remains opposed to ECB intervention

Draghi, who is expected to unveil details of the plan during a press conference on Thursday, declined to speak to reporters as he left the meeting.

Spanish MEP Ramon Tremosa said Thursday's press conference could even include details about new bond buying.

"My feeling is that there will be (a market intervention)… If not, it will stress the markets," Tremosa told DPA.

ECB tensions

Monday's meeting in Brussels comes amid tensions within the ECB's governing council over Draghi's plan to buy more government bonds.

Bundesbank President Jens Weidmann, who is Germany's member of the ECB governing council, has made no secret of his opposition to a bond-purchasing program.

In a recent interview with the Spiegel newsmagazine, Weidmann warned of the danger of such a program becoming "addictive."

"For me such a policy is close to state financing through the printing press," Weidmann said.

A report in the mass-circulation newspaper Bild reported last week that he had even threatened to resign over Draghi's plans.

The Bundesbank declined to comment on that report, as did a spokesman for German Chancellor Angela Merkel. However, the Merkel's spokesman also expressed the chancellor's support for the Bundesbank boss.

pfd/mz (dpa, AFP)