Wellink: not ECB’s job to save insolvent countries

By Gilbert Kreijger

AMSTERDAM (BestGrowthStock) – The European Central Bank (ECB) should only play a limited role in the current euro-zone crisis, ECB governing council member Nout Wellink said on Monday, as it was not the ECB’s job to save countries on the brink of insolvency.

Wellink, who also heads the Dutch central bank, spoke at a public debate in Amsterdam about the role of the ECB and the euro-zone crisis, which embroiled Ireland last month and which is in danger of sweeping up Portugal and Spain.

However, Wellink said he was against the idea of a euro- zone bond, one of the ideas debated in financial circles as a way to support weaker euro-zone members.

“It is not up to the ECB to save countries which threaten to become insolvent, where big budget problems exist. That is a responsibility for the government,” Wellink said.

“We are not in favor of taking on the risk of national economies onto our balance sheet,” he said, adding that “the ECB’s role … should be a limited one. It is important that we are a lender that banks can turn to with collateral.”

European financial markets steadied on Friday as the European Central Bank kept buying euro-zone government bonds in modest amounts, a programme that has been criticised from the start by governing council and Bundesbank head Axel Weber.

When asked if the bond buying programme was designed to fool speculators in Irish or southern European debt, Wellink said: “Our first goal is to let the markets operate in such a way that the monetary transmission mechanism can remain functioning.”

But he added that “it could also be at the same time, as sometimes was the case in the past when doing foreign-exchange interventions, that we want to wrongfoot the markets.”

Wellink said he was not in favor of a euro-zone bond because it was not transparent and would undermine the system.

“I think it is legally not even possible without a change of European rules. You have to realize this is a way of disguising the burden-sharing,” Wellink said, adding: “And it is an instrument called into life that further weakens the sytem.”

Evicting those countries that fail to meet the macroeconomic and budget targets from the euro zone was not an option, but the rules needed to be enforced more strongly, Wellink said.

“They don’t throw California out of the United States … California is bankrupt.”

(Editing by Sara Webb and Jan Paschal)

Wellink: not ECB’s job to save insolvent countries