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No need for ECB to buy sovereign bonds now: German economic adviser

Member of Germany's economic expert advisory board ''SVR'' (Sachverstaendigenrat) Christoph Schmidt addresses the media on its 2012/13 report in Berlin November 7, 2012. REUTERS/Tobias Schwarz

Member of Germany’s economic expert advisory board ”SVR” (Sachverstaendigenrat) Christoph Schmidt addresses the media on its 2012/13 report in Berlin November 7, 2012.

Credit: Reuters/Tobias Schwarz

(Reuters) – The head of the panel of economic experts that advises the German government said on Sunday there was no reason for the European Central Bank (ECB) to start buying up sovereign bonds now to bolster euro zone growth.

ECB President Mario Draghi has opened the door to further measures to help the currency union which is suffering from an economic slowdown, and said the bank would decide early next year whether to take fresh action.

He has said the bank’s Governing Council would not need to be unanimous to start sovereign bond buying.

Germany is resistant to such a move and many politicians argue that this kind of a stimulus program would diminish the political will in some countries, such as France, to carry out structural reforms needed for long-term growth.

“The Central Bank has already introduced various measures to help growth … we see no reason to buy up state bonds now,” Christoph Schmidt, head of the so-called economic “wisemen” told the Welt am Sonntag weekly. The panel also includes a woman.

Schmidt said he could not exclude the risk of deflation.

“But the question is whether the ECB has to preventively fight a fall in prices that has not yet been forecast. We see no reason for this,” he said.

“The ECB could quickly react to deflation by buying sovereign bonds if it really had to,” he added.

“The more active the central bank is … the bigger the risk that France and Italy throw the necessary reforms into the long grass,” said Schmidt.

On Saturday, German Finance Minister Wolfgang Schaeuble expressed his reservations against any ECB bond buying stimulus program.

(Reporting by Madeline Chambers; Editing by Toby Chopra)


Reuters: Economic News

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