German central bank chief criticises EU crisis moves

The head of the German central bank criticised on Thursday crisis-fighting decisions taken by EU leaders for what he said weakened the principle of imposing conditions in return for European aid. "The original concept that envisages aid as a last resort against strict conditionality and supervision is further weakened, the balance between liability and control shifted a bit towards mutualisation" of risk, Jens Weidmann said in a speech, a copy of which was released beforehand. Leaders of the eurozone's 17 member states agreed last Friday in Brussels to let the future European Stability Mechanism (ESM) recapitalise ailing eurozone banks directly once a eurozone banking supervisory board was established. They also suggested that conditions attached to ESM purchases of public debt could be eased, but details on that remained sketchy when the summit ended. Weidmann said in the speech in Berlin that as long as it was unclear to what extent eurozone states were prepared to give up national budgetary competencies "the announcement of new aid is to be viewed critically." He added that while a eurozone banking union, another of the European Union summit's projects, was in principle good, it would depend on "the concrete organisation and the right sequence of steps." Weidmann, and the Bundesbank he heads, have been critical of rescue policies for heavily-indebted eurozone members over the last two years, viewing them as moves towards a mutualisation of debt and risk that would violate EU treaties. From TheDailyStar