ECB can't print money for financing ' Weidmann

European Central Bank council member, Jens Weidmann said the ECB could not bail out governments by printing money."One of the severest forms of monetary policy being roped in for fiscal purposes is monetary financing, in colloquial terms also known as the financing of public debt via the money printing press," Weidmann, who heads Germanys Bundesbank, said in a speech in Berlin on Tuesday. Bloomberg reported Weidmann as saying that the prohibition of monetary financing in the euro area "is one of the most important achievements in central banking" and "specifically for Germany, it is also a key lesson from the experience of hyperinflation after World War I."The ECB is under pressure to ramp up its bond purchases to cap soaring yields in Italy as governments fail to contain the two-year-old sovereign debt crisis. Weidmann also rejected proposals to use Bundesbank currency and gold reserves to help finance purchases by a special fund, saying this is another form of monetary financing.Such a course "undermines the incentives for sound public finances, creates appetite for ever more of that sweet poison and harms the credibility of the central bank in its quest for price stability," Weidmann said.The ECB has so far bought 183 billion euros ($253bn) worth of distressed nations assets which it neutralises, or sterilises, by draining the same amount of money from the banking system. As yields soar to euro-era highs in Italy, the regions third-largest economy, some politicians and economists have called on the ECB to commit to buying as many bonds as it takes to calm markets.Irish Finance Minister, Michael Noonan said on Monday the ECB must stand ready to provide a "firewall" as the debt crisis escalates.Weidmann welcomed the German governments opposition to using the central banks gold and currency reserves to bolster Europes 440 billion euro rescue fund, the European Financial Stability Facility."I am glad that also the German government echoed our resistance to the use of German currency or gold reserves in funding financial assistance to other" euro-area members, he said. "Proposals to involve the Eurosystem in leveraging the EFSF -- be it through a refinancing of the EFSF by the central bank or most recently via the use of currency reserves as collateral for a special purpose vehicle buying government bonds -- would be a clear violation of this prohibition" on monetary financing.
Click here to read full news..