German central banker urges ECB to phase out stimulus
German central bank chief Axel Weber urged fellow European Central Bank policymakers on Tuesday to mull ending exceptional support measures, which would put the ECB at odds with other central banks.
"It is necessary, from a monetary policy point of view, not to postpone the exit from non-standard measures for too long," Weber said in a speech delivered in New York but also distributed by the Bundesbank in Frankfurt.
"There are risks both in exiting too early and in exiting too late. I believe the latter are greater than the former," he added, making it clear the key ECB governor would push for at least a phasing out of the exceptional measures.
The ECB has been providing unlimited amounts of cash to commercial banks to keep interbank lending markets running smoothly and has purchased corporate bonds and sovereign debt as part of its drive to prevent a financial system meltdown.
The US Federal Reserve and Bank of England have also pumped massive amounts of cash into their banking systems via programmes known as quantitative easing, using methods the ECB has refused to consider but which the Fed and BoE are now set to take even further.
That would lead the euro to gain in value against the dollar and pound, penalising eurozone exporters who have underpinned a modest economic rebound.
The ECB nonetheless appears set to push ahead early next year in withdrawing unorthodox stimulus and Weber's comments underscored his determination not to wait much longer in doing so.
Weber, who publicly opposed the controversial ECB decision to begin buying eurozone government debt in May, reiterated his position a day after purchases came virtually to a halt with a weekly total falling to just nine million euros (12.4 million dollars).
"These securities purchases should now be phased out permanently as part of our non-standard policy measures," he insisted.
© 2010 AFP