Germany and the European Central Bank conflict over the role of the ECB. Germamy claims that the ECB is a currency union supervisor and referee. It’s role is to control interest rates and deal with other currency problems. It’s not supposed to take on a “fiscal role”. In fact, many in Germany say it’s unconstitutional to do so. A case is wending through the courts that would challenge some of the agreements Angela Merkel has already made to save the euro.
Jean-Claude Trichet, the President of the ECB, longs for a larger role. He did a bond buy back of Irish and Portuguese bonds. Last year he did Greek bonds. But he neglected to buy any Spanish or Italian bonds. The reason? The German Bundesbank opposed the idea. They think that if you give countries that much aid they will merely become lazy.
I wonder if the real reason is that German fears it will lose its independence if they allow the ECB to make policy for them.Germany wants to be in charge.