German Politician Says Draghi is Turning ECB into Junk Bank

October 6, 2014 Share Print 0

A leading member of German Chancellor Angela Merkel’s Bavarian sister party criticised European Central Bank chief Mario Draghi on Saturday, saying he was turning the institute into a “junk bank” with his plans to buy debt rated as junk.

In a stinging attack, Hans Michelbach of the Christian Social Union (CSU) said Draghi was endangering the stability of financial markets.

“Draghi is increasingly transforming the ECB into a junk bank,” Michelbach told Reuters.

On Thursday, the ECB laid out plans to buy rebundled packages of debt and covered bonds, secured on solid assets such as property. It will include buying debt with a “junk” credit rating from Greece and Cyprus as long as such states are under a formal international financial programme.

Michelbach, who is chairman of the conservative faction in the parliamentary financial committee, said the ECB now wanted to buy the kind of “opaque debt” that was largely to blame for the outbreak of the global financial crisis in 2007/2008.

via CNBC

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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.