Newspaper article International Herald Tribune

Central Bank in Germany Bolsters Its Risk Reserves

Newspaper article International Herald Tribune

Central Bank in Germany Bolsters Its Risk Reserves

Article excerpt

The Bundesbank said Tuesday that it had nearly doubled its loss reserves, a not-so-subtle expression of its uneasiness with the E.C.B.'s crisis measures.

The central bank in Germany said Tuesday that it had nearly doubled the reserves it holds to cover possible losses, a not-so- subtle expression of its uneasiness with emergency measures that the European Central Bank has taken to combat the euro crisis.

The Bundesbank said it had raised its risk provisions, money it sets aside to cover losses like a default on euro zone bond holdings, to EUR 14.4 billion, or about $18.8 billion, from EUR 7.7 billion a year earlier. The bank's profit for the year, which it transfers to the German government, was little changed, rising to EUR 664 million from EUR 643 million.

Jens Weidmann, the Bundesbank president, said the increase in loss reserves "takes appropriate account of the risks on the Bundesbank's balance sheet."

But the decision to set aside further billions may also be interpreted as a verdict by Mr. Weidmann on measures taken by the European Central Bank that he has long criticized, including purchases of Italian and Greek government bonds to try to keep those countries' borrowing costs under control.

Mr. Weidmann, a member of the European bank's Governing Council, has played the role of Cassandra, as Mario Draghi, the bank's president, has overseen an extensive expansion of the E.C.B.'s powers.

Fears the euro zone will crumble have receded since Mr. Draghi promised last year to buy bonds of troubled euro zone countries to contain their borrowing costs. But Mr. Weidmann has often complained that the E.C.B. has gone too far, endangering its independence from political leaders and its mandate to guard price stability above all else.

On Tuesday, Mr. Weidmann repeated his contention that the best solution to the euro zone crisis was for countries to get government spending under control and to improve the performance of their economies. …

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