ECB cuts forecasts as Draghi sees ongoing economic weakness

German Angst

Bundesbank President Jens Weidmann was the only member of the ECB’s Governing Council to vote against Draghi’s bond- purchase plan, known as Outright Monetary Transactions, saying it is tantamount to printing money to finance governments and warning of the risk that it could fuel inflation.

Draghi today reiterated that the ECB stands ready to activate the program as soon as a country like Spain fulflls the pre-requisites of seeking aid from Europe’s bailout fund and signing up to conditions. He has also sought to placate German concerns with assurances that the purchases won’t fuel inflation.

“A rate cut could further undermine support of inflation- averse Germans and thus be counterproductive,” said Christian Schulz, senior economist at Berenberg Bank in London. “It is pivotal for the ECB to ensure strong OMT credibility. This means ensuring a maximum of support from Germany.”

Bloomberg News

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