FRANKFURT (Reuters) – The European Central Bank’s massive buying of government bonds shouldn’t become a form of “unbound”, permanent help to indebted governments, ECB policymaker Jens Weidmann said on Monday.
The head of the Bundesbank defended the ECB’s “flexible” purchases, which have been focussed on debt from struggling Italy, but said these should only be temporary.
“‘Flexible’ should not mean ‘unbound’,” Weidmann said in a recorded message. “Again, it is important to me that monetary policy does not set the wrong incentives for public finances.”
He warned the ECB’s ultra-easy policy will need to be tightened when the economic outlook allows to prevent the central bank from becoming “entangled with politics” and overburdened.
“Policymakers must not assume that we would keep the financing costs of governments low forever or iron out any differences in sovereign risk premia,” Weidmann added.
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