Posted by WARREN MOSLER on 15th October 2010
Confirming suspicions of what’s been happening somewhat behind the scenes.
They may even understand that as long as ECB support does not add to spending there is no inflationary effect.
By Simone Meier and Rainer Buergin
October 15 (Bloomberg) — “A temporary financial support for member states should remain an option at best used only if there’s a clear, considerable contagion risk for the rest of the currency union and if, secondly, the use is tied to strict and painful conditions,” ECB Governing Council member Axel Weber said. Funds should be raised by individual member nations rather than through a joint measure such as Eurobonds, he said. “Measures for crisis management need to be tailored in a way that entails as little as possible distortion of incentives” for member states, Weber said. “That’s why it’s indispensable to credibly anchor the no-bailout principle.” Weber, who is also head of Germany’s Bundesbank, called for a system of “automatic sanctions” for countries breaching the region’s budget rules. It’s important not only to monitor countries’ shortfalls but also their debt, he said.