A senior member of Angela Merkel’s party warned the European Central Bank not to pour money into Greece and other struggling euro zone states through bond purchases, saying this would reduce pressure on them to enact much-needed reforms.
Michael Fuchs, deputy parliamentary floor leader of the German chancellor’s Christian Democrats (CDU), told Deutschlandfunk radio on Friday: “We shouldn’t pump extra money into these states, but rather make sure they continue along the reform path.
“I’d be grateful if (ECB President Mario) Mr Draghi would make statements along these lines.”
In an interview with German financial daily Handelsblatt published on Friday, Draghi urged politicians to implement necessary reforms, reduce tax burdens and cut red tape to support a fragile euro zone recovery.
He also said the risk of the central bank not fulfilling its price stability mandate was higher now than half a year ago, and reiterated its readiness to act soon if needed, with government bond purchases among the tools it could use.
With the euro zone flirting with deflation, financial markets interpreted Draghi’s comments on Friday as strongly suggesting the ECB would soon embark on outright money-printing, and the euro sank to a 4-1/2 year low against the dollar.