×

UPDATE 1-Bundesbank's Dombret rejects calls for QE in euro zone

* Says QE would be "rife with problems"

* Sees German economy cooling, risks from euro crisis

(Adds Dombret quotes, background)

FRANKFURT, Oct 8 (Reuters) - Germany's Bundesbank on Monday rejected calls from the International Monetary Fund for the ECB to consider tackling the euro zone crisis with a policy of "quantitative easing" - effectively, printing money.

The IMF called for the European Central Bank to consider quantitative easing, or QE, in a report issued in June, and has pushed the idea again since.

Speaking ahead of the IMF's annual meeting, held later this week in Tokyo, Bundesbank board member Andreas Dombret restated the German national central bank's view that euro zone countries must tackle the bloc's debt crisis by pursuing reforms.

"In this context, the Bundesbank sees explicit suggestions by the IMF critically," Dombret said in a statement.

"The calls by the IMF that there should be monetary easing by quantitative easing are rife with problems as they redistribute insolvency risks and are close to monetary financing of governments." The ECB itself has said consistently that financing of governments is prohibited by its rules.

The Bundesbank, the biggest of the 17 euro zone national central banks that are stakeholders in the ECB, has also opposed the ECB's new bond-buying programme - dubbed "Outright Monetary Transactions", or OMT.

"The Bundesbank is critical of the IMF's repeated policy recommendations that often over-emphasise the responsibility of monetary policy in solving the current economic policy challenges," Dombret said.

Bundesbank President Jens Weidmann, who sits on the ECB's policymaking Governing Council, said separately that part of the success of central banks is that they recognise their limits instead of embarking on too many tasks during a crisis.

Turning to the German economy, Dombret saw a further cooling of activity this year.

"Furthermore, there are increasing risks for 2013," he said in the statement.

"In particular, a continuation or intensification of the crisis situation in the euro area could increase the loss in confidence and have an increasing impact on the domestic economy and the labour market."

(Reporting by Sakari Suoninen; Writing by Paul Carrel; Editing by Catherine Evans)

((sakari.suoninen@thomsonreuters.com)(+49 69 7565 1267)(Reuters Messaging: sakari.suoninen.thomsonreuters.com@reuters.net))

Keywords: ECB/BUNDESBANK