The German President looks to be attempting to single handedly destroy what is left of European economic stability. Yesterday, in front of Nobel economics laureates and other financial experts, he opened the European economic conference with a speech that obviously was not proof read by anyone from the EU:
In a cannon shot across Europe’s bows, he warned that Germany is reaching bailout exhaustion and cannot allow its own democracy to be undermined by EU mayhem.
“I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU’s workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank’s independence,” he said.
“This prohibition only makes sense if those responsible do not get around it by making substantial purchases on the secondary market,” he said, speaking at a forum of half the world’s Nobel economists on Lake Constance to review the errors of the profession over recent years.
Mr Wulff said the ECB had gone “way beyond the bounds of their mandate” by purchasing €110bn (£96.6bn) of bonds, echoing widespread concerns in Germany that ECB intervention in the Italian and Spanish bond markets this month mark a dangerous escalation.
He did not explain what else the ECB could have done once the bond spreads of these two big economies began to spiral out of control in early August, posing an imminent threat to monetary union and Europe’s financial system.
Mr Wulff doesn’t need to explain himself because the Presidency of Germany is mostly a symbolic role, which makes Mr Wulff’s speech even more surprising. The German political machine is now in damage control, most notably because the President’s speech was seen as more about popularism than actual substance.
The left-wing Berliner Zeitung writes:
“Wulff has expressed himself on the state of the nation. He’s used the freedom of his (largely ceremonial) job to talk without having to act. That’s the privilege of a German president. It invites the criticism that he has nothing but cliché to offer. But that’s not the irritating part of his speech. The irritating part is its lack of historical perspective.”
“Christian Wulff talks as if the subservience of EU politicians to the power and logic of the markets has just recently fallen from the sky. But it’s been the work of the Christian Democrats (CDU) — a party Wulff has led and voted with for years — to bring Germany down this foolish path.”
The center-left Süddeutsche Zeitung writes:
“The euro is teetering. If it falls, Germany will lose huge numbers of jobs created by an unprecedented recent export boom. At such a historic moment, you’d expect to hear from the German president. But Christian Wulff has taken his time — far more time than his predecessor, Horst Köhler, took to utter some biting and relevant words. But at last Wulff has made his criticism. The ECB, he says, should not buy up debt from weaker EU states.”
“There’s one problem. The ECB started the first round of buy-ups in May 2010. The problem is occurring to Wulff about 15 months too late. It would have been much more helpful if Wulff had not let the concrete portion of his speech rest on this issue alone.”
“Reforms of euro-zone debt regulation so far remain too vague to bring stability. Resentment is growing. If this trend can’t be rolled back, the ruling coalition in Berlin and other (rich capitals) will quit waving through bailout packages.”
The Financial Times Deutschland argues:
“It’s good that Wulff has expressed the opinion of many Germans. But it’s not enough for a leader to just simply parrot their perceptions. He needs to engage and explain — to make rational answers to bursts of emotion. But Wulff has only served the people’s prejudices and fears. He’s behaving like a populist, not like a president.”
“From the head of state of Europe’s largest national economy, we can expect some understanding of the difference between private finances and the financing of a European state. But Wulff brushes aside the idea of euro-bonds by saying a private person would also not guarantee debt for all his relatives … Such wild talk doesn’t help anyone find a solution for the euro crisis in the context of a softening economy and jittery institutional investors.”
The center-right Frankfurter Allgemeine Zeitung writes:
“His speech did not just tweak certain elites by the nose — the ones whose ‘malfunction’ actually threatens the unity of German society in the long term. German citizens themselves also came in for implicit criticism: There have been popular movements in recent years against such things as a new train station in Stuttgart, but no broad-based protest against Berlin’s march into public debt and living beyond the government’s means. Wulff, like Chancellor Angela Merkel, points to the single true way out of the crisis — namely a return to firm economics from Germany to Greece. The price for that, he says, will be ‘painful cuts.’
“Wulff laid out no new agenda, but that also isn’t his job. He simply reminded everyone of some basic ground rules that have been ignored for too long. Without observing them, there will be no end to the crisis in Europe.”
Merkel and her finance minister have obviously had to distance themselves from the President’s statements:
The Chancellor and the Treasury to keep the allegations of the President of the ECB to be inappropriate. They point to the independence of the central bank.
Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble has rejected criticism of the behavior of the European Central Bank in the euro crisis. Both CDU politicians reacted so to remarks made by President Christian Wulff . He had accused the ECB, with the purchase of government debt bonds issued by European countries to exceed their mandate.
“We are all well advised, if we respect the independence of the central bank and accept their decisions and not criticize them,” said Schäuble. Merkel announced she would “not criticizing the ECB,” because the bank “their decisions independently” cases.
Merkel said she was with the President, however, agree that the problems tackled in the long term European debt crisis should be. The question today is, “how one comes down from the high level of debt.” Every country in the EU, the euro area, but also the U.S. would have to face this task. “Otherwise our prosperity is in danger,” said Merkel.
Given that the ECB was basically jawboned into purchasing Italian and Spanish bonds against the wishes of its own president because of the failure of European politicians to provide any other viable alternative, it seems totally ridiculous that a ceremonial bureaucrat could now be challenging this course of action.
But the Wulff is a lawyer and so his public challenge to the ECB’s operations on top of his statements about the safety of German democracy are very dangerous. We saw that danger in Greek bonds last night.
Another day in Europe, the political issues gets worse and nothing is being done to fix the underlying economic problems.