German leaders critical of ECB stimulus plan

Jens Weidmann, president of Germany's central bank, the Bundesbank, on Friday openly criticized the decision of the European Central Bank (ECB) to print money in order to buy government bonds.

"The fact is," Weidmann told the Bild newspaper, "with the new program, the ECB will become the largest creditor of the euro-states. This entails the risk that (countries with) solid national budgets will be neglected."

This critique echoes all the way back to 2012, when Weidmann was on the ECB board and the idea of buying sovereign bonds was first floated. He was the only person to vote against the measure when the ECB first gave itself the theoretical right to buy struggling countries' debt with new money.

Weidmann said the 2012 program, called Outright Monetary Transaction (OMT), meant that the ECB was effectively financing governments directly. Weidmann threatend to resign from the German Federal Bank several times over the incident, ushering in a chill between himself and ECB Chief Mario Draghi that persists between the two today. Indeed, he is sometimes dubbed the 'anti-Draghi' by the German media.

The wrong course for Europe

Jens Weidmann was not the only prominent German to voice his disapproval of the stimulus plan. The leader of the opposition Left party, Gregor Gysi, said in an interview with Deutschlandfunk radio on Friday that the ECB's decision to flood the market with more than one billion euros will only devalue the currency - which plummeted on Thursday after the ECB announcement, and has nosedived again on Friday past $1.13, $1.12, and reaching $1.1267 by the evening in Europe. That's the lowest euro-dollar exchange rate registered in more than a decade.

Instead of buying up old bonds, Gysi said that the bank would have been better off directly investing in ailing eurozone countries.

"Purchasing government bonds is the wrong course," the parlamentarian said emphatically.

The move would only hurt countries like Greece, Portugal, and Spain, Gysi said, increasing youth unemployment in nations where it already hovers around 50 percent. "If you buy from the banks, once again you make only the banks rich," Gysi told Deutschlandfunk.

Reiner Holznagel, who leads the German Taxpayers' Federation, was of the same mind as Weidmann and Gysi. Holznagel said the ECB was swiftly becoming of the world's "bad banks."

"The eurozone was never so highly in debt as it is now. The national governments are responsible for this negative record...this task cannot be passed on to the ECB."

es/msh (AFP, dpa, Reuters)