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Bundesbank Criticizes ECB Bond Plan

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Germany’s Bundesbank stepped up its criticism of the European Central Bank’s plan to embark on potentially “unlimited” government bond purchases, widening a rift over how to tackle the sovereign debt crisis.

“The Bundesbank holds to the opinion that government bond purchases by the Eurosystem are to be seen critically and entail significant stability risks,” the Frankfurt-based central bank said in its monthly report today. The new program “could be unlimited” and decisions about potentially far greater sharing of solvency risks should be taken by governments or parliaments, not by central banks, it said.

The comments suggest Bundesbank President Jens Weidmann won’t support a measure the ECB is rushing to design to help reduce governments’ borrowing costs and win them time to implement fiscal reforms. Spanish and Italian 10-year bond yields slid to the lowest in more than six weeks today after German news magazine Der Spiegel reported the ECB’s new program may set yield caps. In response, the ECB issued a statement saying it’s “misleading to report on decisions which have not yet been taken.”

via Washington Post

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza

@alfonso_forex

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