BERLIN: Germany on Monday dampened hopes for powerful action from the European Central Bank to fix the euro crisis and slapped down speculation of an immediate breakthrough on debt-wracked Greece.
European markets opened firmer following a report Sunday in respected German newsweekly Spiegel that the ECB was mulling huge intervention to drive down the borrowing costs of countries hit by the crisis.
Without citing sources, Spiegel said the Frankfurt-based central bank would cap the borrowing costs of individual nations, buying their bonds in the open market to drive down these costs to below the limit set.
The aim would be to control speculation on the likelihood of the eurozone breaking up and help countries like Spain and Italy which have suffered from rapidly spiralling borrowing costs.
But a spokesman for German Finance Minister Wolfgang Schaeuble was quick to quash the report.Martin Kotthaus told a regular government briefing he was not aware of such a plan but that "purely theoretically and speaking in the abstract, such an instrument would of course be very problematic."
The ECB, which very rarely comments on press reports, also reacted swiftly, saying it was "absolutely misleading to report on decisions, which have not yet been taken."
The spokesman warned it was "also wrong to speculate on the shape of future ECB interventions."The comments by the two spokesmen dampened sentiment on the markets, with the euro giving up earlier gains against the dollar on the foreign exchanges.
Confidence in the euro was also hit when Germany's powerful central bank reiterated its opposition to a plan outlined by ECB President Mario Draghi earlier this month to assist countries that apply for help from the EU.
Draghi said the ECB "may" intervene to buy the bonds of countries that have applied for aid from the EU's bailout fund and committed to tough reforms in return.
But the Bundesbank wrote in its monthly report that "government bond purchases by the eurosystem should be viewed critically and entail, not least, substantial stability policy risks."
The Bundesbank -- and several politicians in Berlin -- are concerned that buying the bonds of countries oversteps the ECB's mandate to keep a lid on inflation and reduces the incentives for nations to make economic reforms.
indiatimes.com
European markets opened firmer following a report Sunday in respected German newsweekly Spiegel that the ECB was mulling huge intervention to drive down the borrowing costs of countries hit by the crisis.
Without citing sources, Spiegel said the Frankfurt-based central bank would cap the borrowing costs of individual nations, buying their bonds in the open market to drive down these costs to below the limit set.
The aim would be to control speculation on the likelihood of the eurozone breaking up and help countries like Spain and Italy which have suffered from rapidly spiralling borrowing costs.
But a spokesman for German Finance Minister Wolfgang Schaeuble was quick to quash the report.Martin Kotthaus told a regular government briefing he was not aware of such a plan but that "purely theoretically and speaking in the abstract, such an instrument would of course be very problematic."
The ECB, which very rarely comments on press reports, also reacted swiftly, saying it was "absolutely misleading to report on decisions, which have not yet been taken."
The spokesman warned it was "also wrong to speculate on the shape of future ECB interventions."The comments by the two spokesmen dampened sentiment on the markets, with the euro giving up earlier gains against the dollar on the foreign exchanges.
Confidence in the euro was also hit when Germany's powerful central bank reiterated its opposition to a plan outlined by ECB President Mario Draghi earlier this month to assist countries that apply for help from the EU.
Draghi said the ECB "may" intervene to buy the bonds of countries that have applied for aid from the EU's bailout fund and committed to tough reforms in return.
But the Bundesbank wrote in its monthly report that "government bond purchases by the eurosystem should be viewed critically and entail, not least, substantial stability policy risks."
The Bundesbank -- and several politicians in Berlin -- are concerned that buying the bonds of countries oversteps the ECB's mandate to keep a lid on inflation and reduces the incentives for nations to make economic reforms.
indiatimes.com
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