UPDATE 2-German economy minister says liquidity not a cure-all

* German Economy Minister warns of excess liquidity

* ECB interest rate announcement due at 1245 GMT

(Adds quotes, details in pars 10-16)

By Sarah Marsh

BERLIN, Dec 2 (BestGrowthStock) – Extra liquidity alone won’t
resolve the euro zone’s debt problems, German Economy Minister
Rainer Bruederle said on Thursday as financial markets’ hopes
grew of more action from the European Central Bank.

Bruederle warned that pumping too much money into the
economy risked creating new bubbles.

The ECB is expected to say it will keep unlimited liquidity
operations in place for longer when its monthly meeting ends on
Thursday but investors are also hoping for at least a hint it
will increase the value of government bonds it buys.

The bank is unlikely to announce mass new bond purchases,
however, and Germany’s representatives at the ECB have opposed
the programme from the start.

“Permanently printing money is not the solution,” Bruederle
said. “The money presses must not fall into the hands of
politicians.”

The ECB will be under pressure to unveil new steps to
stabilize the euro zone at the meeting as the currency bloc
battles a crippling debt crisis that has stoked contagion fears
in the United States and Asia.

Germany struggled to sell its government debt on Wednesday
and Portugal’s borrowing costs soared in further signs an 85
billion euro ($110.7-billion) EU/IMF rescue of Ireland last
weekend and public assurances from leaders that the euro will be
defended at any cost have failed to impress investors.

Bruederle reiterated that the ECB should remain independent
and not fold to pressure from politicians to print money,
describing the last U.S. fiscal stimulus package as excessive.

“The Americans are permanently producing liquidity, he said.
“I see a big danger that our American friends exaggerate.”

Bruederle also said he thought there was a good chance that
Portugal and Spain could avoid tapping the euro rescue facility.

Risk premiums on Spanish and Italian bonds have risen to
euro lifetime highs this week and markets are discounting an
eventual rescue of Portugal. While that would be manageable,
assistance for its neighbour Spain would sorely test EU
resources and raise deeper questions about the integrity of the
12-year-old currency area.

“I see good chances that both countries will manage without
(the rescue fund),” Bruederle said, pointing to the enormous
reform efforts in both countries.

He also said he believes the current levels of the euro
rescue fund are sufficient.

“I think the rescue mechanism is sufficient,” he said,
adding that in a best-case scenario, Ireland won’t need a single
cent from Germany.

Bruederle said he did not believe speculation about a return
to national currencies within the euro area, saying this option
was “not realistic”. He also said giving up the euro would
weaken the European economy.
(Writing by Brian Rohan and Erik Kirschbaum; editing by Patrick
Graham and Catherine Evans)

UPDATE 2-German economy minister says liquidity not a cure-all