European Central Bank chief Mario Draghi will travel to Germany to explain to members of parliament there his bond-buying solution to the recovery of Europe. Germany's banking officials have objected to the action as one that will let troubled nations off the hook by cutting borrowing costs without austerity budget changes. Draghi has said the purchase of sovereign paper will go hand in hand with budget reviews, but it is not clear that these will be stringent.
One hurdle Draghi faces is concern among Germany politicians and voters that it is primarily their money that the ECB will use to buy the debt of weak countries. Bloomberg reports:
"Draghi is on a mission to smooth concern that OMT won't send inflation skyrocketing or lumber German taxpayers with liabilities they can't pay," said Frank Schaeffler, finance spokesman for the Free Democrats, who are in coalition with Chancellor Angela Merkel's Christian Democrats. "Many lawmakers - even if they don't admit it - have grown suspicious of the ECB and its head, once dubbed the most German of non-German central bankers."
Douglas A. McIntyre
Filed under: 24/7 Wall St. Wire, Politics