German Central Bank Says Inflation Top Concern

Germany’s central bank, the Bundesbank, wants European Central Bank monetary policy to focus on price stability, in keeping with the ECB’s single mandate to keep inflation at or below 2%. That means no more bond buying by the Eurozone’s central bank, a move that will force the peripheral states like Spain and Greece to resort to fiscal measures to re-stabilize.

A report at MarketWatch attributes the statement to an unnamed Bundesbank official speaking to CNBC today. Here’s the money quote:

Strategists said the remarks indicate the Bundesbank isn’t in favor of restarting the ECB’s bond-buying program, which it has long opposed, or seeing the central bank take other aggressive steps to bring down high borrowing costs for Spain and Italy.

Germany has apparently forgotten that its own recovery from recession in the early years of the new century came about because the ECB was willing to make cheap money available to the periphery to get them to purchase German exports. Germany’s recovery from its recession was due almost entirely to its ability to export to other Eurozone members.

Until the Bundesbank, and the Merkel government, fully and meaningfully revise their opposition to direct ECB lending to sovereigns, no “agreement” or “breakthrough” in the European financial crisis carries any force. And the sooner markets get over their momentary euphoria every time the Eurozone announces another plan with no teeth, the sooner the Eurocrats will do something meaningful.

Paul Ausick