May 25, 2012 / 9:44 AM / 6 years ago

Buba boss dismisses French-led euro bond push

PARIS (Reuters) - German central bank chief Jens Weidmann dismissed French-backed calls for the use of euro bonds to boost economic growth in Europe, saying in an interview in French newspaper Le Monde that “this debate irritates me a bit”.

“It’s an illusion to think euro bonds will solve the current crisis,” the Bundesbank chief said.

Spurring economic growth in a debt-burdened region required structural reforms and not more public spending when it was not even sure that expenditure on infrastructure was what was missing, he said.

“You cannot give someone your credit card without having the means to control the spending,” he said.

French President Francois Hollande is pressing his European partners to commit to euro bonds, a form of pooled debt-raising, despite stiff opposition from German Chancellor Angela Merkel.

Weidmann, who is also part of the governing council of the European Central Bank, also said that financial aid for Greece should stop if Athens did not respect commitments it made in return for outside help.

“Otherwise the agreements would lose all credibility and we would be engaging in unconditional transfers,” he said.

The central banker defended the ECB’s role in fighting the debt crisis in the euro zone, saying that it had bought time by lending heavily to banks in the region at low interest rates but that such lending had its limits.

“It’s like morphine. It eases the pain but doesn’t cure the disease. It can even have side effects, by delaying adjustment in the banking sector for example.”

Asked about the possibility of wage rises in Germany, the Bundesbank chief said it was possible to have raises above the euro zone average for a time, but that it was vital to ensure that inflation expectations remained firmly anchored.

Writing By Brian Love

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