Asmussen backs Draghi (updated) | FT Alphaville

Asmussen backs Draghi (updated)

And so to the Frankfurter Rundschau…

Here’s the interview with German ECB director Jörg Asmussen which was helping to compress Spanish and Italian sovereign yields further on Tuesday. His words are being hailed by some (such as the Telegraph’s Ambrose Evans-Pritchard, as a “crucial turning point” in the eurozone crisis.

A couple of extracts, via Google translate:

There will again be bond purchases. Why do you believe that the new program is more successful than the first two programs that have reduced short term interest rates?

Because it is designed to be better than the old bond purchase program, the SMP.

You’ll have to explain more.

The ECB will only be in parallel with the EFSF or the ESM later works. A State must provide an auxiliary request and fulfill comprehensive economic policy conditionality. In my personal view, it would be good to ask for a request to the primary market interventions by the EFSF / ESM must be asked before the ECB is acting. Such a request is only a necessary condition for intervention by the ECB. The Governing Council will decide in full independence, if, when and how bonds are purchased on the secondary market….

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Bundesbank President Jens Weidmann has voted as a single in the Governing Council against the new program. What Asmussen looks unlike Jens Weidmann?

I did not attend the meeting due to holiday participated.

Do you share the concerns of Bundesbank chief Weidmann?

Jens Weidmann, and I do not talk over each other. The cooperation is close and trusting, but also confidential, as in the good old days of the grand coalition.

Only a continuing currency may be stable

The Bundesbank is worried that so the ECB’s mandate is exceeded. Are they right?

We operate within our mandate, which is primarily aimed to guarantee price stability in the medium term for the entire euro area. Only one currency, to their survival, there is no doubt, can be stable. For this we work at the ECB.

So Asmussen buys the “convertibility risk” argument amplified by Mario Draghi.  The relationship between himself and the Bundesbank is “confidential.” Oh, and he was on holiday when the ECB governing council met, fatefully, on August 2.


As so too is this very public backing of Draghi’s putative bond buying plan: Spain managed to sell €4.5bn of 12 and 18 month paper on Tuesday — the top of the indicated range and at substantially lower yields.

Some €3.5bn of 12 month paper went at 3.070 per cent, against 3.918 last time, while just under €1bn of 18m paper priced at 3.335 per cent, compared with 4.242 last time.

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Joseph has now provided a human translation of Asmussen’s remarks…

There are to be bond purchases once more. What makes you think the new programme will be more successful than the first two programmes, which only reduced rates in the short term?

Because it will be better conceived than the old bond-buying programme, the SMP.

You’ll have to clear that up a bit more.

The ECB will only be active in parallel with the EFSF, or later the ESM. A state must make a request and carry out comprehensive economic reforms. In my personal view, it would be good to demand that a request for primary market intervention by the EFSF/ESM must be made before the ECB will be active. Such a request is but a necessary condition for the intervention of the ECB. The ECB council will decide with full independence if, when, and how bonds will be bought in the secondary market.

Bundesbank president Jens Weidmann provided the lone vote against the new programme. What does Jorg Asmussen see that Jens Weidmann doesn’t?

I didn’t attend the meeting because of a vacation.

Do you share the doubts of Bundesbank chief Weidmann?

Jens Weidmann and I, we talk with each other, not over each other. The cooperation is close and trusting, but also confidential, just like the Grand Coalition of the good old days. (NB reference to times the CDU/CSU and socialists have worked together)

The Bundesbank is concerned that the ECB’s mandate will therefore be overridden. Are they right?

We’re acting within our mandate, the priority of which is aimed at guaranteeing price stability for the euro area as a whole. Only a currency about which there are no doubts to its survival can be stable. That’s what we’re working for at the ECB.


Related links:
Spiegel, Buba, the ECB and a rather predictable back and forth — FT Alphaville
Was Draghi really a disaster? — FT Alphaville