European Central Bank President Mario Draghi
welcomed Tuesday an easing of market tensions in the wake of ECB
hints it might embark upon unlimited bond buying, saying the eurozone
was making "progress."
"The fact that we have seen positive signs so quickly is
revealing. It shows that investors are fundamentally confident in the
overall trajectory of the euro area. They are ready to reinvest at
the first signs of stabilization," he said.
"This underscores my central message today: the euro area is
making progress - and investors are recognizing that progress,"
Draghi told an audience in Berlin of German industrialists - who have
been among the most hostile to his change in ECB policies.
Draghi earlier met with Chancellor Angela Merkel at her office.
They did not meet the press afterwards, but Merkel's spokesman said
the two were in agreement that European nations needed to show more
will for reforms to improve their economic competitiveness and to
regain credibility.
Germany's Bundesbank chief, Jens Weidmann, was the only ECB board
member to vote against the recent decision on bond-buying.
Draghi gave his speech to the Confederation of German Industry
BDI, which had earlier in the day endorsed Weidmann's stance.
"I understand that some observers in this country have concerns
about the medium-term implications of this policy," Draghi said.
He denied the ECB was exceeding its powers, saying, "New steps
have been needed to maintain price stability in the face of
fragmented financial markets. These new steps are not a departure
from our mandate.
"Indeed, they are the only way to ensure that we continue to
fulfil our mandate. All the measures I have described today are
fundamentally about ensuring stability."
Draghi also argued that extreme differences in interest rates
between Germany and Spain were not justified.
Michael Heise, the chief economist of Europe's biggest insurance
group, Allianz, estimated Tuesday that the German federal government
would ultimately save 67 billion euros (87 billion dollars) thanks to
the sovereign debt crisis.
Berlin has paid close to zero interest to borrow money as the
crisis grinds on.
He said the annual windfall was "well over 10 billion euros." The
total payoff comes by adding up future savings over the various terms
of federally issued bonds. Conversely, southern governments must pay
far higher interest rates.
But Allianz noted that German private households had lost well
over 12 billion euros per year from a lack of profitable investment
opportunities.
Earlier, German newspaper Bild reported that ECB lawyers are
reviewing the legality of the controversial bond plan, which requires
eurozone countries to submit to external supervision as a condition
for ECB action to lower their interest rates.
EU treaties ban direct lending by the ECB to governments, but
allow it to buy a wide range of bonds. The ECB and Bundesbank legal
departments were assessing "at what scale and at what duration" the
proposed ECB bond purchases would become a treaty breach.
The paper said the lawyers did not exclude putting the issue to
the European Court of Justice (ECJ). Germany's federal constitutional
court warned this month it might scrutinize whether the ECB has the
power to buy bonds.
Both the ECB and the Bundesbank declined requests for comment on
the Bild report.
