Through the Wire

German Lawmakers Demand ECB Voting Reform, Oppose Bond Buying

August 16, 2012
| Economics
| Europe

BERLIN, Aug 16 (Reuters) - A handful of lawmakers in Angela Merkel's coalition are demanding a reform of the European Central Bank's voting system to strengthen Germany's influence, highlighting worries in Europe's biggest economy about the bank's bond-buying plans.

Chancellor Merkel has shown no sign of concern about ECB President Mario Draghi's approach.

However, many Germans, fed up with bailing out euro zone states, fear the ECB's plans to buy government debt to reduce crippling Spanish and Italian borrowing costs, would amount to the financing of governments - something the bank is not supposed to do. They also argue it would ease pressure on governments to cut debt.

"We need a new alignment of voting weights in the ECB's decision-making committees according to the proportion of liability (a country takes on)," conservative lawmaker and eurosceptic Klaus-Peter Willsch told Handelsblatt.

Willsch is a well-known rebel in Merkel's centre-right coalition and one of the most vocal critics of bailouts. He has lodged several complaints with Germany's Constitutional Court.

"Under Draghi, the ECB is mutating into a state financier and a 'bad bank' against European constitutional law," he said, demanding a veto right for Germany in all ECB decisions.

Some other more senior members of the coalition added their voice to opposition to the ECB's plans.

"The purchase of sovereign debt by the ECB on the secondary market must remain the absolute exception," a leading Christian Social Union (CSU) lawmaker Stefan Mueller told Reuters.

The CSU, which shares power in Merkel's coalition, tends to be more eurosceptic than Merkel's Christian Democrats (CDU).

After Draghi declared last month he would do whatever it took to save the euro, Merkel and French President Francois Hollande issued a statement echoing his pledge and reiterating their determination "to do everything to protect the euro zone".

German Finance Minister Wolfgang Schaeuble also welcomed Draghi's verbal intervention, which has since brought a measure of calm to financial markets.

It is highly unlikely that the ECB will change its operating rules and in private, people close to Merkel have expressed exasperation at the pressure the Italian is coming under in Germany.

They note that previous heads of the Bundesbank took extraordinary measures in the decades before the creation of the euro, and were even pressed at times to take specific policy steps by German leaders, but their independence was never questioned on the scale that Draghi's is now.

Senior Christian Democrat (CDU) Michael Meister dismissed the debate about reforming the ECB as being an illusion.

"There is no question of changing the ECB at the moment. So this is an illusional discussion," Meister told Reuters.

RESENTMENT

But there is still plenty of resistance to the bond buying in Germany, the euro zone's paymaster which has already guaranteed some 310 billion euros in bailouts. Bundesbank chief Jens Weidmann is the voice of opposition within the ECB, although he looks isolated there.

Resentment that Italy, viewed by many Germans as fiscally irresponsible, was ever allowed to join the euro runs deep in Germany and privately some politicians in Berlin accuse Draghi of running an "Italian central bank".

Jan Muecke, a state secretary in the transport ministry and a member of junior coalition partner the Free Democrats (FPD), even demanded a ban on the purchase of bonds.

"We urgently have to remove the basis for the ECB to buy further sovereign bonds," Muecke told Handelsblatt.

Free Democrat Frank Schaeffler, another well-known dissenter in Merkel's coalition, also appealed for reform.

"We need a reform of the voting system in the ECB Council. That Cyprus and Malta have as many votes as Germany is a serious mistake," Schaeffler told Handelsblatt Online.

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