Bloomberg News

Weidmann Says ECB as Lender of Last Resort Would Be ‘Wrong’

January 03, 2012

(Adds comments from Weidmann in second paragraph.)

Jan. 3 (Bloomberg) -- Bundesbank President Jens Weidmann said it would be “profoundly wrong” for the European Central Bank to become a lender of last resort and step up its purchases of government bonds to contain the fiscal crisis.

“It may appear tempting from the point of view of highly- indebted states and the banks that hold their paper if central banks assume their role of lender of last resort,” Weidmann wrote in an opinion piece for Germany’s Boersen-Zeitung newspaper published today. “However, the Eurosystem would throw its principles overboard and ignore the existing legal framework. This would be the profoundly wrong way.”

European leaders have struggled to contain the region’s debt crisis, adding pressure on the ECB to step up its purchases of government bonds. While the central bank intervened in debt markets to lower soaring yields, it has refused to unleash its unlimited firepower, saying it’s up to governments to restore confidence in the currency union.

Weidmann, who is also a member on the ECB’s Governing Council and a vocal opponent to bond purchases, said that confidence and credibility are crucial in times of crisis.

“The Bundesbank will continue in the coming months and years to reliably advocate that the basic principles of monetary policy made in Frankfurt will be adhered to and that a credible and sustainable solution of the debt problem will be reached,” Weidmann said. Both the ECB and the Bundesbank are based in Frankfurt.

--Editors: Simone Meier, Jeffrey Donovan

To contact the reporter on this story: Rainer Buergin in Berlin at

To contact the editor responsible for this story: James Hertling at

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