Intervention met with skepticism
WASHINGTON – The U.S. isn’t the only place where conservatives have a problem with aggressive central bank intervention in the economy.
A senior member of Germany’s conservative ruling party said the European Central Bank was pushing the limits of its mandate by moving to buy bonds of financially troubled countries. The comments came as a top German court was set to rule this week on a challenge to the eurozone’s new bailout fund.
The criticism of the ECB by Volker Kauder, the parliamentary leader of German Chancellor Angela Merkel’s Christian Democratic Union political party, echoes the sharp opposition by many U.S. Republicans of the Federal Reserve’s unprecedented economic intervention under Chairman Ben Bernanke.
The Fed’s policymaking Federal Open Market Committee meets Wednesday and Thursday and is expected to launch another round of its controversial bond-buying efforts in the face of slowing growth in the U.S.
Kauder seemed sympathetic to the ECB’s moves in his comments to Germany’s Bild newspaper, though he did say the new bond program announced last week brought the bank’s independence “a little bit into question.”
“The ECB has reached the border of what is permitted, also because it is moving into the area of state financing,” Kauder said.
But he noted that “these are quite simply extraordinary times,” and that the ECB needed to take action to prevent a collapse of the euro.
“A failure of the euro would be incalculably more costly,” Kauder said.
European leaders are closely watching Germany’s Constitutional Court, which is set to rule on a challenge to the European Stability Mechanism bailout fund. The complaint, which came from another conservative lawmaker, questions the legality of the fund.