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ECB's Weber says Europe can go beyond 750 bn euros rescue

Axel Weber, German Central Bank president and council member of the European Central Bank, said Wednesday the euro is solid and euro-zone member states will protect it from speculative attacks, even if that means putting more money on the table. He said any speculative attack on the euro would fail as he assumes European countries are ready to increase the EUR750 billion rescue package created in May to fend off threats to financial stability within the 16 member states of the euro zone. "If that amount is not enough, we could increase it," Weber said. "An attack on the euro has no chance of succeeding."

The European Financial Stability Facility was created in May in response to the Greek crisis. It consists of EUR440 of loan guarantees from euro-zone states and is complemented by EUR60 billion in E.U. funds and EUR250 billion from the International Monetary Fund. Weber added that Germany will stand by the euro. He said it is stable and will emerge stronger from the current crisis. "There is no going back" from the common currency, he said.

He also said European Union member states need to gradually introduce a permanent crisis mechanism and that details of such a mechanism need to be laid out soon to send markets a clear message. Weber said he is convinced that in December, euro-zone members will be able to present proposals for such a mechanism. The euro-zone members are trying to agree on a permanent crisis-management mechanism to bail out countries that run into fiscal problems once the current mechanism set up at the height of the Greek crisis comes to an end in 2013.

La Stampa - Jean-Claude Trichet, ECB, rejects Weber Says Overwhelming Majority of ECB Council Backs Bond Purchases

European Central Bank President Jean-Claude Trichet took issue with recent comments on ECB policy by Bundesbank chief Axel Weber, saying they did not represent the views of the central bank's governing council. Asked in an interview with Italian newspaper La Stampa whether the program didn’t work and should be scrapped, he responded: “No! This is not the position of the Governing Council, with an overwhelming majority.”

ECB Bundesbank Weber warns crisis is ongoing as fears mount over Ireland - ECB buying Irish government bonds

Axel Weber, the President of Germany's Bundesbank and a leading member of the council of the European Central Bank, said he was frustrated more had not been done to tackle the risks posed by very large banks. "The financial crisis is still with us – we are not in year one after the crisis, we are in year four of the crisis," Mr Weber said. "Moral hazard is in the financial system. I want to get to a situation where the term 'too big to fail' does not exist."

Axel Weber, the Bundesbank president, and the European Central Bank

Axel Weber, the Bundesbank president, has put himself on a collision course with European Central Bank policymakers by arguing publicly in favour of extending emergency help for eurozone banks until at least next year.

The comments by Germany’s central bank head were unusually forthright and suggested he wanted to assert his authority ahead of a decision next year on a successor to Jean-Claude Trichet as ECB president.

Mr Weber told Bloomberg Television in an interview broadcast on Friday that the ECB should continue providing unlimited liquidity on a weekly, monthly and three-monthly basis until at least the start of 2011. Discussion on the ECB’s “exit strategy” would be “focused on the first quarter” he said.

Other members of the ECB’s 22-strong governing council are likely to agree with Mr Weber’s cautious approach, which on Friday drove the euro lower. But he will have created annoyance by pre-empting discussions at the council’s next meeting on September 2.

Central banks doing a good job or not?

Central banks and other bank supervising regulators have advised banks to seek longer term funding-gap finance in the hope too that lending can be placed on longer maturities. The stability of the cost-of-debt-financing is as important as its price level, especially when government wants industry to invest in equipment, infrastructure, and stock building, and do so somewhat ahead of expected higher consumer demand when revival in consumer credit and residential property values return.

Jean-Claude Trichet at a Hearing at the Economic and Monetary Affairs Committee of the European Parliament

Introductory statement by Jean-Claude Trichet, President of the ECB,
Brussels, 28 September 2009

Trichet: The ECB’s exit strategy

Speech by Jean-Claude Trichet, President of the ECB
at the ECB Watchers Conference
Frankfurt, 4 September 2009

I. Introduction

Ladies and gentlemen,

It is a pleasure to be with you today to participate in this 11th edition of the ECB Watchers’ Conference. I am delighted to see that this conference has established itself so successfully as a venue for interaction between the European Central Bank and its observers.

ECB and Managing risk: The role of the central bank in a financial crisis


Speech by José Manuel González-Páramo, Member of the Executive Board of the ECB
at Risk Europe 2009; Frankfurt am Main, 4 June 2009


1. Introduction

Ladies and gentlemen,

It is a great pleasure for me to be speaking here at Risk Europe 2009. Over the last few years this annual conference has succeeded in gathering together the brightest minds in both academia and financial practice in the area of risk management, offering interesting and topical discussions and providing valuable insights into future developments in this field. And I’m sure you will agree with me when I say that the challenges faced by risk managers in the financial world have rarely been more complex than they are at present. I would like to focus today on how a central bank can help the risk management community to address these challenges. I will also highlight the restrictions that I see in central banks’ operational leeway. However, I will not consider the macro-prudential role of a central bank, recognising that this is a topic large enough to merit a separate discussion.

A few years ago, it would probably have been unusual for a central banker to be giving a speech at a conference on risk. Today, we know that central banking and risk management are very much interconnected. First, central banks have played a key role worldwide – through their operations in financial markets – in alleviating the implications of the dramatic intensification of banks’ liquidity risk since the summer of 2007. It is no exaggeration to say that central banks have become the best friends of banks’ liquidity risk managers. Second, central banks have learned that their own financial risk management is crucial if they are to deliver, in a prudent manner, the best possible liquidity support for strained markets and financial institutions.

While central banks have certainly done a lot, there are no shortage of proposals for other things that central banks should do. Having the ability to create unlimited purchasing power at short notice without being constrained by internal liquidity considerations, central banks have often been regarded as having limitless power to resolve economic crises.

Such discussions concerning the limits on central banks’ ability to intervene – and the dangers if these limits are ignored – are not new. One of the most famous discussions on this topic is Milton Friedman’s presidential address to the American Economic Association in 1968, entitled “The role of monetary policy” [1]. The address consisted of three main sections: the first on “What monetary policy cannot do”; the second on “What monetary policy can do”; and finally a third on “ How should monetary policy be conducted?”

While opinions on monetary policy have changed a lot since 1968, I would like to follow the structure of Friedman’s address – focusing, however, on central banks’ policies for the management of financial crises.

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