Germany's Bundesbank has no problem finding government bonds to buy for the European Central Bank's stimulus programme and opposes changing the parameters of the 2.55 trillion-euro scheme, one of its directors said on Monday. Joachim Wuermelling, the Bundesbank board member in charge of its market operations, sought to quash market concerns that the central bank may run out of German government bonds to buy, forcing a change in the national quotas used for the bond purchases.
"As far as alleged shortages are concerned ... the Bundesbank has never faced and does not face difficulties in purchasing the intended amounts of German government bonds," Wuermelling told an audience of bankers in London. Deviations from national quotas, which have become more visible in recent months, were caused purely by technical factors and did not represent an attempt to support a specific country, he said.
The Bundesbank and the ECB have been holding back on their purchases of German debt in recent months, with Italy and France picking up the slack, ECB data show. But Wuermelling said dwindling liquidity over the summer forced central banks to spread out the re-investment of maturing French bonds, mechanically pushing up Italy's share of total purchases in July.
The ECB decided to cut the pace of its bond purchases to 30 billion euros ($35 billion) per month at its October meeting but pledged to continue the stimulus programme until it is confident that inflation was "consistent with its inflation aim" of just under 2 percent. If purchases were to continue much beyond September, finding enough German debt to buy might become a struggle, according to analysts.
But Wuermelling reaffirmed the Bundesbank's opposition to changing quotas for how much of each country's debt is bought each month or rules banning the Eurosystem of euro zone central banks from owning more than a third of any individual bond or the total debt of any single country. "If the capital markets are to encourage fiscal policymakers to embrace fiscal prudence, it is vital that market mechanisms generally continue to function properly," he said.
"I believe that changing the parameters - which is sometimes discussed rather carelessly, in my opinion - would have considerable negative repercussions for (market) mechanisms."