March 4, 2012
Bundesbank President Jens Weidmann's repeated public criticism of aspects of European Central Bank policies he voted in favor of has created a rift within the ECB's governing council that could undermine the bank's strategy for combating the crisis.
In recent weeks, Mr. Weidmann has warned of risks associated with the abundant loans the ECB has injected into banks at low interest rates, despite having voted in favor of the ECB's decision nearly three months ago to make three-year loans available to banks in two installments—one in late December and one last week.
His comments suggested that similar measures in the future would be met with significant resistance from the bank's conservative wing, making it tougher for the ECB to take aggressive steps such as stepped-up bond purchases or more interest-rate cuts. No further three-year loans are planned, although ECB officials haven't ruled them out.
The dispute escalated over the weekend when Mr. Weidmann told German weekly Der Spiegel that euro-zone central banks "take on substantial risks into their balance sheet which are at the fringes of their mandate." He wants quality measures for collateral tightened as soon as possible.
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