Bundesbank Blasts Draghi For Breaking Bailout Taboo

Tyler Durden's picture

Earlier today, we noted that Germany (or at least the Finance Ministry) has thrown its support behind a Greek referendum on euro membership. The idea is that if Greeks vote to remain in the currency bloc, they are essentially also voting to accept that their lifestyles are about to get a lot more austere in exchange for Germany’s willingness to help the country avert an outright economic collapse. We also highlighted Russia’s politically-motivated move to convince Greece to join the BRICS bank before closing with a recap of Yanis Varoufakis’ latest speech to parliament in which the increasingly unhinged FinMin suggested Greece’s debt to the ECB should be wrapped up and “sent overnight into the distant future,” before claiming that the idea of a debt swap “filled Mario Darghi’s soul with fear” because the ECB chief is terrified of the Bundesbank. 

The comedic value of Varoufakis’ latest tirade aside, there’s certainly some truth to the suggestion that the German central bank and its head Jens Weidmann are skeptical of PSPP and deeply concerned that the ELA lifeline keeping the Greek banking sector afloat amounts to the monetary financing of the Greek government (because after all, when Greek banks use ECB loans to keep the Greek treasury afloat, it’s difficult to explain how that doesn’t amount to the central bank financing the Greek government). 

Apparently at his wits’ end with a world consumed by monetary madness, Weidmann let his feelings be known on Thursday not only about the ECB’s support of the Greek banking sector via ELA, but about QE in general. Reuters has more:

The head of Germany's Bundesbank ripped into the European Central Bank on Thursday, saying emergency funding for Greek banks broke the taboo of financing governments and it was not up to central banks to decide who was or wasn't in the euro zone.


Jens Weidmann also said it was questionable whether money printing by the ECB to boost the euro zone economy and halt deflation was necessary…


"Given the ban on monetary financing of states, I don't think it's ok that banks which don't have access to the markets are being granted loans which then finance the bonds of their government, which doesn't have access to the markets itself," Weidmann told German newspaper Handelsblatt according to advance extracts of an interview to be published on Friday.


Asked whether he would be prepared to stop emergency funding to Greek banks and therefore force Athens out of the euro zone, Weidmann said central banks were not responsible for "the make-up of the euro zone or granting aid payments".


Weidmann also hit out at the ECB's bond-buying scheme known as quantitative easing (QE), saying: "The question remains whether the QE programme was really necessary given our primary aim of price stability and how we should assess the risks and side-effects that inevitably come with such a scheme."


He said QE made Eurosystem central banks the biggest creditor of governments and monetary and fiscal policy were becoming increasingly interconnected.


"That can increase the political pressure on central banks when it comes to future monetary policy decisions, especially as member states' drive to reform is also being weakened."

Weidmann has for some time been the lone voice of reason among EU officials (with the exception of the incorrigible Herr Schaueble) and he is of course entirely correct in his assessment because ELA is indeed akin to the monetary financing of governments and of course when it comes to the "risks and side-effects" of QE "schemes", no one knows better than Weidmann as he is being forced, on a monthly basis, to break the market for the debt issued by his own government by commandeering all bunds yielding better than -0.20% and hoarding them on the Bundesbank's balance sheet. 

Here's a clip from the Weidmann interview:

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Joebloinvestor's picture

Yeah and US QE wasn't for the banks benefit.

NotApplicable's picture

Can't these banksters settle things like gentlemen? Like say, dueling pistols at twenty paces?

Haus-Targaryen's picture

Herr Wiedmann is gunning for the NEURO Central Bank chief position. 

PartysOver's picture

Give it time.  And when they do it will be game over.

Bangin7GramRocks's picture

If only any of them were gentlemen....

MiTasol's picture

Twenty paces seems far too generous.

i_call_you_my_base's picture

"saying emergency funding for Greek banks broke the taboo of financing governments"

LOL. Right, the "taboo".

Millivanilli's picture

No, it is up to Goldman Sach to decide who is in the euro.  


These banksters are fucking insane.

ThirdWorldDude's picture

Yes, they already did.

I'd like to see Weidmann address EU's financial disburses to Ukraine, but at the end of the day he's just a messenger with a limited power of attorney...

back to basics's picture

It's all theater. He supported QE at the end of the day because......it benefits Germany. He needs a new schtick. 

Winston Churchill's picture

The message is ; no more.

He thinks the German banks are safe now.

Then again , so was Lehman, on paper.

Net became gross, with the counterparty failures.

Winston Churchill's picture

The message is ; no more.

He thinks the German banks are safe now.

Then again , so was Lehman, on paper.

Net became gross, with the counterparty failures.

Lady Jessica's picture

Yes, I agree with the theatre sentinent.  Weidmann doth protest too much.

But does anyone really know what Q€ is meant to be doing?

If it's about currency devaluation, then mission accomplished.

(Confession:  I haven't a fucking clue, other than some vague idea about QE batons being passed from zone to zone in a great global monetisation relay).

BoPeople's picture
BoPeople (not verified) May 14, 2015 12:15 PM

Do German clowns get to decide who is in the Eurozone and not?

... it would be very telling if they do.

Maybe Germany and German banks should be held to the same standard as Greece.

lasvegaspersona's picture

Is Yanis using Jedi mind tricks? Ordinarily not making sense is bad. Perhaps this is complicated game theory in practice. Anyway it makes a great cover for insanity if it is not a trick.

elvy's picture

So what didn't make sense exactly? Greece can't possibly pay back SMP bonds, and ECB is banned from refinancing or extending bonds it holds.

So Varoufakis proposes that ESM buys these SMP bonds from the ECB and extends them. The alternative is a simple default on them, or a new loan.

??? No make sense, too hard to grasp ???

11b40's picture

Exactly....makes as much sense as Greece ever retiring the debts.  

Seasmoke's picture

This is a game of hot potato correct ????

TeethVillage88s's picture

"Power Sharing" being the Culture of International Deal Making, Secret Agreements, and International Trade Treaties seems best exemplified by Cecil Rhodes Vision of Redrawing the World Map with English Dominance... through Deals with Germans, Jews, French, Dutch, Belgians, Chinese, Russians or Americans.

Power Sharing allows an EU State to exist, and be powerful.

But falls a part if there is no discipline, no common principals for both banking, Debt levels, money printing, money creation, loans, currency... union wages, government wages and benefits. How about those German corporate Travel benefits and vacation benefits??

Emergency Liquidity Assistance and public sector purchase programme DON'T seem to matter as much as Redrawing the Map of the World.

- Chaos in the Middle East is about Redrawing the Map again
- English Drew the Map of all of the Stans with Russia long ago (100 years ago)
- Englsih Drew the Map of the Current Middle East
- USA is trying to Draw the Map of Eastern Europe

Cecil Rhodes lives today in NATO, Europe and USA

TPP is also about "Power Sharing" and Redrawing the Maps of the World... where USA will give up it's Middle Class for Good, become a nation of Debtors like Europe with no movement between classes... and worse US Individuals will cease to have power, standing, and rights "in a world where the US Constitution is now Void."

Greek Tragedy?? Yes, but it will be USA Greek Tragedy soon enough.

- Persistence of Large Organizations and Large Budgets is always Ripe for both Plunder and "Capture" by Evil Actors... this is what has happened to the USA, the Government, the Banking, the Secret Spy Agencies, the Corporations who are now both part of Government and the Spy Agencies... they are so large that a network can easily capture and control toward a "Pestilence of Debt", War, Authoritarianism, and Tyranny.

williambanzai7's picture

What a bunch of fucking clowntards...They didn't see all this shit coming?

This has been about one thing from the beginning: bailing out the TBTF banks.

Now the time has come to pay the piper.

That's right the same TBTF banks that, after being bailed out in 2008-2009,  have proceeded to demonstrate over the ensuing six years or so that there is literally not one single corner of global finance that has not been run like a giant monkey fuck.

farmboy's picture

This shit show started with the EFSF. Anyone looking at that can only conclude that the mad now run the asylum and this is no exception.

That was 5 years ago we are long due for central banks supernova exploding.

gcjohns1971's picture

"The head of Germany's Bundesbank ripped into the European Central Bank on Thursday, saying emergency funding for Greek banks broke the taboo of financing governments"





He can't be serious.

Financing Governments in order to allow the largest banks to never be bankrupt is the essense of the Quid-Pro-Quo on which Central Banking is founded.

falak pema's picture

The three way tug of war to save the banks: ECB/IMF/ EU all pulling in different directions expecting the other to swallow the bitter Varoufakis pill.

Yanis is right on one issue : its a huge PONZI. But he has no solution for Greece as whatever the issue Greece has to learn fiscal discipline and statist decision making and implementation. 

Greece is a basket case to define if the rot of western decadence is now something that has hit Sarajevo 1914 levels. 

MaxThrust's picture

Varoufakis is making positive noises (for Greek consumptiuon)  so when the axe falls and Greece is force out of the Euro, he himself will not be blamed.

I think Varoufakis understands the situation perfectly well. The only option for Greece is to print their own currency which they can debase when the need arises.

Just like all the previous Greek governments have done for years before they joined the Euro.