The ECB Can Intervene In Fiscal Policy Through Large Bond Purchases

The ECB Can Intervene In Fiscal Policy Through Large Bond Purchases

The European Central Bank (ECB) may risk large interference in sovereign fiscal policy beyond its mandate through large-scale bond purchases. This was pointed out on Wednesday by the president of the German central bank Bundesbank, Jens Weidmann, who has been a long-term critic of the so-called quantitative easing (QE). "Large purchases of government bonds can be a legitimate and effective tool for monetary policy," he said at the conference, adding: "But, as I have repeatedly emphasized, there is a risk that they blur the line between monetary and fiscal policy." "We should also pay special attention to how we interpret our mandate," he said. "The broader we interpret our mandate, the greater the risk that we will become involved in politics and overburden the ECB with too many tasks and tasks," he added. Weidmann has criticized the previous round of QE during the eurozone debt crisis. Germany was one of the main opponents of the purchase of government bonds. A group of German university professors and entrepreneurs has even lodged a complaint against the ECB's monetary policy in the past with the German Constitutional Court. They asked him to examine whether the bank had exceeded its mandate through large-scale bond purchases.