Tuesday, February 22, 2011

Alex Weber: End the EU Bailoiut Madness

Now that Alex Weber is about to leave government work, he ismuch  more open about the madness of EU bailouts: WSJ reports:
The financial rescues of Greece and Ireland have damaged the foundations of Europe’s currency union, Deutsche Bundesbank President Axel Weber said Monday.
In a speech to an audience of academics and business representatives in Duesseldorf, Weber said it was essential not to let the deals that have been made to keep financial stability in the euro zone become the norm.

“We have to strengthen the foundations again,” he said.

Returning to a theme already made earlier Monday in the Bundesbank’s monthly report for February, Weber warned against measures that buy time in the short term but which encourage moral hazard in the longer term by creating false incentives for states.

“All too often, short-term, ad hoc decisions are taken that are counter-productive in the medium term,” Weber said.
He included in this category the proposal now circulating among euro-zone governments to allow the European Financial Stability Facility to buy the bonds of financially troubled states on the open market, or from the ECB. The ECB has spent over EUR77 billion in supporting the government debt markets of Greece, Ireland and, most recently, Portugal.
“The European Union mustn’t become a transfer union,” Weber said, arguing that the tendency of all such measures was to put extra burdens on the taxpayers of other countries in the euro zone.

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