‘ECB has done its job’

Bundesbank board member Andreas Dombret said the European Central Bank has done its job to buy time for governments to fix weaknesses in the euro’s foundations.

“To those who ask what else the euro system can do, I say that we have done our part, now it’s up to the political leaders to deliver on the fiscal and structural policy side and decide on governance issues,” Mr Dombret said in London.

“This is why it can’t be a short-term fix.”

ECB president Mario Draghi indicated last week that neither interest-rate cuts nor additional longer-term refinancing operations would be appropriate measures for now.

The ECB “acted decisively” when it lowered interest rates to 1%, flooded banks with more than €1tn of cheap cash, and bought sovereign and covered bonds to calm down markets, he said. “All of these measures contributed to stabilise the euro area and buy time to solve the underlying problems.”

European leaders have focused on the idea of a banking union that would include a single European regulator, euro-wide deposit insurance and a common bank resolution fund.

“A banking union in itself is not a bad idea but it needs to follow fiscal and political union,” Mr Dombret said. “So far I’m not fully convinced that the time bought with the various bailouts and measures has been wisely invested to solve the long-term issues of the crisis.”

Bloomberg