Dec. 20 (Bloomberg) -- Bundesbank Board member Andreas Dombret said the sovereign debt crisis cannot be solved by beefing up the rescue funds or cranking up the central bank printing presses.
The strategy of increasing bailout funds “will hit a wall, either a political one or a financial one,” Dombret said, according to the text of a speech delivered today in Frankfurt. “Any suggestion to push that limit by printing money is dangerous.”
Dombret said that while a central bank’s resources are almost “infinite in theory,” employing them to buy up government bonds would compromise the institution’s independence, “one of the most important pillars” of a stable currency.
The Bundesbank is opposed to the European Central Bank’s government-bond purchase program, which it employs to smooth the transmission of interest rates. The ECB has rejected demands by investors and political leaders to step up the purchases to stem surging euro-area borrowing costs.
--Editors: Jeffrey Donovan, Eddie Buckle
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