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German media, lawmakers decry ECB ‘blank cheque’

A protester holds a poster of a euro sign during an anti-Merkel demonstration in Madrid Sept. 6, 2012. Amid anger at Germany's role in blocking moves to mutualize European sovereign debt, demonstrators in crisis-hit Spain rallied against Germany's Chancellor Angela Merkel.


Germany's conservative press accused the European Central Bank on Friday of writing a "blank cheque" to indebted euro zone states by agreeing to buy their bonds, and some pro-government lawmakers threatened legal action to stop the purchases.

ECB president Mario Draghi unveiled plans on Thursday for potentially unlimited purchases of bonds of up to three years maturity of countries that request a European bailout and fulfill strict policy conditions. The German central bank chief was the sole dissenting voice in the decision.

Chancellor Angela Merkel has given her tacit support for the plans, saying they buy time for vulnerable states such as Spain and Italy to implement tough reforms.

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But the outcry from a small but vocal euroskeptic minority of her own centre-right MPs and from influential conservative media underlined the political risks for her as the euro crisis builds ahead of a general election one year from now.

"Blank cheque for the indebted states," was the headline of the top-selling Bild tabloid, a harsh critic of the bailouts for Greece and other struggling euro zone nations, adding that the ECB move could make the euro "kaputt".

"Draghi sets off Germany's alarm bell," was the headline in the conservative daily Die Welt.

An opinion poll released on Thursday showed nearly one in two Germans has little or no confidence in the Italian Mr. Draghi.

Many German conservatives share the concern of Jens Weidmann, head of the Bundesbank, that the bond-buying plans violate a taboo on financing deficits, remove pressure on governments to reform and will eventually stoke inflation.

Several MPs vowed legal action to block the plans.

"We should consider making legal checks on whether the ECB has hugely overstepped its mandate. I am convinced that this is the case," Klaus-Peter Willsch, a leading euroskeptic member of Ms. Merkel's Christian Democrats (CDU), told German radio.

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"As the largest credit nation in the whole game Germany should have a right of veto (in the ECB)," he added.

Mr. Weidmann was isolated in Thursday's meeting of the ECB Governing Council, where mighty Germany, with 82 million people and Europe's biggest economy, has just one vote like tiny Malta.

In a critical statement, the Bundesbank said the decision was "tantamount to financing governments by printing banknotes."

Investors cheered the ECB rescue plan, with the euro and stocks rising worldwide and the borrowing costs of Spain and Italy tumbling. Die Welt headlined the market reaction bitterly "Financial markets cheer the death of the Bundesbank."

Frank Schaeffler, from Ms. Merkel's junior coalition partner the Free Democrats, said Germany should file a lawsuit with the European Court of Justice, saying the ECB was in danger of turning into a "bad bank for all the junk debt of Europe."

The rank-and-file of Ms. Merkel's coalition still support her stance in the euro crisis of offering help to struggling countries on condition that they implement tough measures to put their public finances in order and improve competitiveness.

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"As long as there is conditionality, it is okay," deputy CDU floor leader Michael Fuchs told Reuters, arguing that the ECB was still acting within its mandate.

Speaking in Stockholm on Friday, Finance Minister Wolfgang Schaeuble contradicted Ms. Weidmann, saying the bond buying plans did not mark the start of monetary financing of sovereign debt. He dismissed the media outcry as exaggerated.

In Berlin, Ms. Merkel's spokesman Steffen Seibert said the ECB had acted independently and within the framework of its mandate in taking its decisions.

But lawmakers are keeping a nervous eye on opinion polls that show rising public opposition to bailouts in Germany, where fear of hyper-inflation is deeply engrained in the national psyche.

A poll published on Spiegel Online on Friday showed 54 per cent of Germans wanting the country's Constitutional Court to block the euro zone's permanent rescue fund, the European Stability Mechanism (ESM). Twenty-five per cent want it approved.

The court's ruling, eagerly awaited by financial markets, is scheduled for next Wednesday. Legal experts polled by Reuters expect the court to approve the ESM but set conditions limiting Berlin's future flexibility.

Business daily Handelsblatt, which often voices concern at the financial burden of the bailouts on German taxpayers and companies, drew a link between the ECB's latest plans and the pending court ruling, and criticized the "democratic deficit of the euro rescuers".

The conservative Frankfurter Allgemeine Zeitung, a megaphone for Germany's monetary hawks, said "the border between monetary and fiscal policy has been blurred" and called the argument that bond-buying was within the ECB's mandate "far-fetched."

A study by R+V Insurance released on Thursday showed 73 per cent of Germans fear the costs for taxpayers of the euro debt crisis and 65 per cent see the continued existence of the common currency under threat.

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