Resona International Management – Germany Protests ECB Policies


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The European Central Bank can expect the intensity of German protests over its decision to begin asset purchases to continue as the inevitability of full-blown quantitative easing looms larger on the horizon. That was the crux of a recent research note sent to clients by strategists at Asia-based broker-dealer, Resona International Management.

The firm cites an interview given to the Wall Street Journal by Jens Weidmann, President of the German Bundesbank in which he strongly criticized European Central Bank President, Mario Draghi’s decision to begin purchasing assets including private sector bonds in order to provide stimulus to a stagnating Euro zone economy.

“The ECB has never been under any illusion that the stiffest opposition to any unconventional monetary policy tools would emanate from Germany but Mr. Wiedmann’s comments to the WSJ has ensured there are no misunderstandings. Despite this, we think the piece is intended to make Germany’s objection to full-blown quantitative easing
– where the central bank buys up the sovereign bonds of member nations – a matter of public record in case Mr. Draghi is left with little choice,” said a Resona International Management researcher.

The IMF and several core Eurozone countries have been calling for the European Central Bank to begin buying sovereign debt for some time but Mr. Draghi has held back arguing that the central bank would prefer to wait to see if conventional tools like interest rates begin to have the desired effect.

Resona International Management says it expects Mr. Draghi to bow to political pressure and begin buying sovereign debt by the end of the first quarter of 2015.

“Euro zone growth has slowed to the point where even Germany is facing the very real prospect of entering a technical recession so Mr. Draghi may ultimately have little choice despite,” said the Resona International Management researcher.
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