Tietmeyer Says ECB Loans to EIB May Breach Treaty
Written on May 19, 2009
Former Bundesbank president Hans Tietmeyer said the European Central Bank may have breached the Maastricht Treaty by granting the European Investment Bank access to its refinancing operations.
The move “in my view is not in line with the treaty,” Tietmeyer said at an event at the Bank of Finland in Helsinki today. “According to the treaty there should be no direct financing for the public sector, government or banks owned by the public sector.”
The comments are a rare public criticism of ECB policy by Tietmeyer, who held sway over European monetary policy for much of the 1990s and helped draw up the central bank’s founding treaty. The ECB said May 7 that the EIB, which is owned by the European Union and lends to small and medium-sized companies, will be eligible to borrow unlimited funds from the central bank as officials try to encourage lending.
Tietmeyer, 77, hammered out key aspects of the Maastricht Treaty between 1990 and 1991 with Jean-Claude Trichet, who was head of the French finance ministry at the time and is now president of the ECB. Tietmeyer said today the ECB’s move is risky because it opens the door to future treaty breaches.
Rules
“A supranational central bank must strictly follow the rules because any lax interpretation can open doors which cannot be closed in the future,” said Tietmeyer, who serves as a Vice Chairman of the Board at the Basel, Switzerland-based Bank for International Settlements no fax pay day loans.
The EIB signed loan contracts for 38.7 billion euros ($52.2 billion) in the European Union between October and March. It estimates that contracts could amount to 70 billion euros this year because of access to the central bank’s liquidity.
Tietmeyer’s intervention comes as the ECB’s Governing Council splits over its next step to fight the recession.
The traditional policy tools laid out in the Maastricht Treaty have lost their potency as interest rates approach zero, prompting some officials to argue that the ECB should start buying corporate debt.
Other policy makers, such as current Bundesbank President Axel Weber, have opposed following the Federal Reserve and the Bank of England in purchasing corporate and government securities.
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