The German central bank expressed concern on Monday over measures taken at a July 21 European summit to help Greece, saying they could undermine budgetary discipline and increase risks for creditors.
'The recent decisions transfer several risks to creditor countries and their taxpayers and mark a new major step towards a mutual sharing of risks in the case of fragile public finances and economic errors by certain eurozone countries,' the Bundesbank said in its monthly report for August.
On July 21, European heads of state and government approved a second Greek rescue package worth some 160 billion euros and an extension of the capacity of the European Financial Stability Facility.
Those measures 'weaken the foundations of the currency union' which is based on 'fiscal responsibility and discipline through the capital markets,' the Bundesbank said.
Because the move did not simultaneously provide creditor countries with much influence or control over budget practices in the countries in question, they might find it easy to build up more debt, the German central bank argued.
It criticised in particular the purchase of
sovereign bonds by the European Central Bank, which also reduced the motivation to adopt 'appropriate financial policies,' it said.
After lying dormant
for several months, the ECB bought 22 billion euros ($32 billion)
worth of sovereign bonds last week, a move that
supported Italy and
Spain.
The EFSF is to take over such bond purchases from the ECB once national parliaments have approved the decision.
Source : New Age
