On Thursday, the ECB not only raised the key interest rate for the first time in eleven years, but also introduced an anti-crisis instrument at the same time: TPI. But CDU boss Merz doesn't leave a good hair on that. "This step is not covered by the mandate of the ECB," he writes.
CDU leader Friedrich Merz has massively criticized the European Central Bank's (ECB) new TPI bond-buying program. If the ECB wants to level the interest rate differentials between states in the euro zone by specifically buying bonds from ailing states, "then this is the last step in monetary state financing, i.e. in financing the budgets of these countries with central bank money," wrote the opposition leader in a newsletter.
"This step is not covered by the mandate of the ECB, the central bank then acts outside of its competence," said Merz. The ECB would thus finally abandon the contractual basis on which monetary union was founded a good twenty years ago.
At their interest rate meeting on Thursday, the euro watchdogs agreed on a new crisis bond purchase program with which they can help heavily indebted countries like Italy in the event of turbulence on the bond market. The new tool (Transmission Protection Instrument - TPI) is intended to ensure that monetary policy can have an even effect in the euro area and that there is no divergence in the financing costs of the individual euro states. Since Italy's Prime Minister Mario Draghi announced his resignation for the first time last week, Italian government bonds have come under increasing pressure.
"The interest rate differentials that we are now seeing are not 'unjustified' or even 'disorganized' market dynamics, but precisely the responses from the capital markets that correspond to the risk assessment of the investors," criticizes Merz. Italy, Spain, Portugal and Greece are rated as riskier than Germany, the Netherlands, Belgium and Austria.
For more than ten years, the ECB has only operated in crisis mode. "It reacted too late with the interest rate step that has now been announced and at the same time is trying to enforce a uniform monetary policy in the euro area, which cannot exist at all due to the different budgetary risks," complains the CDU leader.
There was also criticism of TPI from other quarters. The President of the German Institute for Economic Research, Marcel Fratzscher, expressed concern. The ECB has chosen the right middle ground between demands for a more restrictive monetary policy and stronger support for the most vulnerable member countries, said Fratzscher. TPI is the necessary counterweight to the now faster rise in interest rates in the coming months and is "on the one hand clever, but on the other hand also risky". Because it is unclear how the instrument will be used. The conditions for this are so low that "the ECB should de facto hardly be subject to any restrictions". Fratzscher therefore fears increasing political pressure on the ECB.
Bundesbank President Joachim Nagel considers TPI to be legally watertight, as he told the "Handelsblatt". "When designing the TPI, the Governing Council attached particular importance to taking legal requirements and limits into account," said Nagel. "So I'm confident that if it went to trial it would stand up in the courts," he added. During the preparation of the new instrument, the atmosphere in the discussions was very intensive and very constructive, said Nagel. The Bundesbank President had made his support dependent on the conditions to which the instrument is to be linked.
The ECB ties the program to several conditions, such as debt sustainability, and wants to use analyzes by the ESM euro rescue fund and the EU Commission to determine this. "The new instrument is not about aid for the governments of individual countries, but about the effectiveness of monetary policy transmission and thus about ensuring price stability," explained Nagel. If there is a concrete, potential use case, the ECB has the analytical capacity to base the upcoming decision.
