Free at last. Less than a year after becoming president of the European Central Bank, Mario Draghi can move to the second phase of his term — his plan for an ambitious sovereign bond-buying programme. He will not meet a unified German opposition at the ECB governing council meeting next week. That will add to the plan’s credibility, and in the longer term allow Draghi a freer hand in running the central bank.
German Chancellor Angela Merkel has already given her qualified support to Draghi’s proposal to buy short-dated sovereign bonds of countries suffering high yields, in exchange for economic reforms and fiscal rectitude. Jorg Asmussen, the German member of the ECB’s executive board, is on the same line. But Bundesbank President Jens Weidmann, the other German sitting on the ECB governing bodies, opposes bond buying on the grounds that it comes too close to monetary financing of budget deficits.
True, the German government and the Bundesbank have never been aligned. They have different strategies and different interests. But Merkel — albeit after she decided that the euro deserved to be rescued — proved remarkably flexible on any plan that wouldn’t require too much extra money and protracted negotiations with her parliament. Asmussen, it must be noted, doesn’t come from the Bundesbank.
Weidmann, on the other hand, is playing his part — reaffirming the independence of the German central bank even at the price of serious market unrest. On Draghi’s bond-buying plan, he is also trying to manoeuvre himself into a win-win position. If the plan fails, he told us so. If it succeeds, it will be because he insisted on all sorts of conditions and safeguards.
Asmussen’s support for the plan is important because it dilutes Weidmann’s opposition to just another opinion — rather than the stance of the Euro zone’s most important member.
Ten months after taking over, Mario Draghi seems to be hitting his stride. From here on, the ECB’s policy will bear his imprint. Now he must turn a political coup into a financial hit.
