ECB Pledge to Save Euro Hitting Resistance in Germany
By: Steve Liesman | CNBC Senior Economics Reporter
In a statement that appears aimed at dampening market expectations for actions from the European Central Bank, a Bundesbank source tells CNBC that “monetary policy should strictly focus on its primary mandate to preserve price stability.”
The source added that “the problems some member states are facing are fiscal problems and they should be addressed by fiscal instruments, if necessary the European Rescue Fund, the EFSF (explain this).”
Late last week, ECB (explain this) President Mario Draghi raised market hopes of strong action when he said the bank would do all it could within its mandate to save the euro and suggested that addressing the wide disparity in borrowing rates among some European nations fell within that mandate.
"To the extent that the size of these sovereign premia hampers the functioning of the monetary policy transmission channels, they come within our mandate," Draghi said.
Those comments, along with supporting remarks by German Chancellor Angela Merkel and French President Francois Hollande, sparked rallies in global equity and bond markets.
The CNBC Fed Survey, released this morning, found that 89 percent of market participants believe the ECB will purchase additional sovereign debt (explain this) in the next six months.
Draghi had been scheduled to meet with Bundesbank president Jans Weidmann ahead of Thursday’s meeting of the ECB’s Governing Council.
Although it represents the largest economy in the euro zone, the Bundesbank does not hold any additional voting power on the council.
In the past, the ECB has acted over German objections. In fact, two German ECB members have resigned in the wake of ECB actions to address the financial crisis.
— Written by CNBC's Steve Liesman
