'Asking for trouble'

Recent measures by the European Central Bank (ECB) to counteract the eurozone debt crisis came under fire on Wednesday when the German president, Christian Wulff, said the financial body was "asking for trouble" by buying the government bonds of financially-stricken countries.

The ECB resumed buying up Italian and Spanish sovereign bonds this month in a bid to relieve those countries from market pressure. Both Madrid and Rome have struggled to raise funds by selling bonds for some months owing to flagging confidence in their debt-laden economies.

But Wulff, whose role as president is largely ceremonial, said the ECB's moves set a risky precedent and allowed those countries to avoid taking the steps needed to balance their strained public finances.

"That is asking for trouble in the long run and can only be tolerated in the interim," he said in a speech to Nobel economics prize winners in the southern German town of Lindau.

"I consider the sizeable purchase of individual states' bonds by the European Central Bank to be legally questionable."

Citing an article in European Union law banning the ECB from buying bonds from governments, Wulff said: "This ban only makes sense if those responsible don't circumvent it with comprehensive purchases on the secondary market."

The ECB buys the bonds on the secondary market.

Cracks appearing

Wulff, who is a member of Chancellor Angela Merkel's conservative Christian Democratic Union (CDU), called on the ECB "to return quickly to its agreed basic principles."

The remarks came amid signs of growing tensions within CDU ranks over Merkel's handling of the debt crisis that is now in its 20th month.

The ECB also faced objections to the move from within its own ranks, with Governing Council policymakers Jens Weidmann and Jürgen Stark, both Germans, opposing the bonds buy up.

The central bank is to pass on the responsibility of purchasing sovereign bonds to the European Financial Stability Facility, Europe's rescue fund for heavily indebted states, once national parliaments approve the measure.

Wulff is expected to sign off on the legislation next month assuming it passes the German parliament.

Author: Darren Mara (Reuters, AFP, dpa)
Editor: Rob Turner