by Stephen Fidler
Wall Street Journal
March 12, 2011
The “Pact for the Euro” agreed by euro-zone leaders at their meeting in the early hours of Saturday, that we reported here, probably goes further than most pre-summit expectations suggested it would. But those expectations had been scaled down sharply in the month before the meeting, and the leaders ruled out a proposal that would have comforted both the financial markets and European Central Bank president Jean-Claude Trichet.
Mr. Trichet had wanted the euro zone’s bailout funds to be able to buy bonds that governments have issued in the past. (These are called secondary market purchases in market jargon.) That’s, in whole or in part, because the ECB has more than €77 billion of sub-prime sovereign bonds on its own books that Mr. Trichet would like to offload on to the government-funded bailout vehicles.
But Angela Merkel, backed by Nicolas Sarkozy, said no. Since they hold the purse strings, they won the day–but only after what some people present described as some very tough exchanges with the ECB boss.
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