By Tom Fairless
The head of Germany's influential Bundesbank has warned European Central Bank officials not to question limits on the ECB's bond-buying program, suggesting that a long-running dispute over its easy-money policies will rumble into the term of its incoming President Christine Lagarde.
The ECB last month unveiled a large stimulus package aimed at shoring up the wobbling eurozone economy that included an open-ended, EUR20 billion-a-month ($21.8 billion a month) bond-buying program.
Speaking in Vienna, Bundesbank President Jens Weidmann said he hoped the ECB's move wouldn't put in question the rules governing the program, which include a ban on buying more than 33% of the debt of any individual government.
"The accuracy and importance of the limits set by the Governing Council on government-bond purchases have not changed," Mr. Weidmann said. "I hope that the decisions now taken don't lead to these restrictions...being questioned."
Analysts estimate the ECB may only be able to buy bonds for around a year before running into the limits of the program, known as quantitative easing or QE. That would likely be a problem because the ECB has pledged to continue buying bonds until inflation reaches its target of just below 2%. The eurozone's inflation rate slid to 0.9% last month.
The ECB's chief economist, Philip Lane, has argued in recent days that the bank still has room to buy debt for "an extended period of time," without specifying how long. The ECB currently holds around EUR2.6 trillion of eurozone government and corporate debt.
Mr. Weidmann has long opposed the easy-money policies championed by the ECB's current president, Mario Draghi, but some analysts had hoped the dispute might fade with Mr. Draghi's departure on Oct. 31.
Ms. Lagarde has indicated she wants to bridge the divide between the ECB and Germany, the largest eurozone economy and the ECB's biggest shareholder. Many Germans are wary of the ECB's expansionary monetary policy, and senior German officials say that its bond purchases subsidize profligate governments in southern Europe.
However, criticism of the ECB's latest policy move went far beyond its German contingent, with at least seven of the bank's 25-member rate-setting committee opposing it, including the heads of the Dutch and French central banks. Sabine Lautenschläger, the ECB's top German-born official, announced her resignation last week after questioning the need for fresh stimulus, especially QE.
Mr. Weidmann said Tuesday that he regretted Ms. Lautenschläger's departure. "Her voice has also enriched the Council and we will miss it in the future," he said. "The diversity of opinions and perspectives has always been the strength of this body, not a weakness."
Ms. Lagarde is scheduled to deliver a speech in Berlin on Nov. 4 to honor Wolfgang Schäuble, a former German Finance Minister who publicly criticized Mr. Draghi over the ECB's policies.