In a Bloomberg.com article by Jana Randow and Lukanyo Mnyanda entitled “Draghi Boxes Himself into a Corner with Bond Signal: Euro Credit” they tell us that The Bundesbank reiterated its opposition to bond purchases today.

The Bundesbank said restarting ECB bond purchases is not the best way to address the debt crisis.

“The Bundesbank has repeatedly expressed in the past that it views bond purchases critically because they blur the line between monetary and fiscal policy,” a spokesman said.

As we can see, the comments made by Draghi yesterday regarding Spanish and Italian bonds are already making a difference in the bond markets and have had the effect of reduced the demand for dollars while there hasn’t been any buying of bonds by the ECB as of yet. Perhaps if the ECB had been more willing to backstop struggling governments in the past, the need to follow up with concrete actions would be minimal.

I disagree with Weidmann completely. The buying of some bonds, maintaining an open-ended promise to do so, and letting the markets do the heavy lifting (The Chuck Norris Effect) has been part of the key to containing the crisis all along. The other part of the key is revision of the 2% inflation target, but I suppose one step at a time is better than nothing.

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