ECB FOCUS-Deepening rift hampers ECB public opinion battle

* Deepening split at ECB hampers efforts to sell bond buys

* Weber opposition "like blaspheming in public"

* Conspiracy theories developing along national lines

By Krista Hughes, Chief ECB Correspondent

FRANKFURT, June 1 (Reuters) - A deepening split at the top of the European Central Bank is undermining efforts to convince the public of the merits of buying government bonds and could suck the ECB further into the murky waters of European politics.

Axel Weber, head of the German Bundesbank, has made no secret of his objections to a policy designed to calm nervous markets and help stabilise the euro, but which he contends could fuel inflation.

He went a step further on Monday by calling for a strict cap on the programme, so far open-ended, which entails buying debt of weaker south European economies such as Greece, Portugal, Spain and Italy on the secondary market. [ID:nLDE64U16A]

Weber's stance is fanning opposition in the euro zone's biggest economy, with German media stubbornly sceptical of the programme despite an interview blitz by ECB President Jean-Claude Trichet and the core Executive Board.

It also raises questions about Weber's motives, since he is seen as a frontrunner to replace Trichet in 2011 along with Italy's Mario Draghi.

Playing the super-hawk is unlikely to win Weber friends in countries that do not share Germans' horror of hyperinflation and sets him up in stark contrast to the pragmatic Trichet, steeped in French diplomatic traditions.

But a tough showing wins him points in Berlin as a fiercely independent inflation fighter in the Bundesbank tradition, a point not lost on his fellow central bankers.

It also comes at a time when Germany and France are at odds over the future direction of the euro zone.

In central banking terms, Weber's disassociating himself from the bond-buying "is like blaspheming in public, you just don't do it", one euro zone monetary source said.

"But the ECB presidency depends on the negotiating power of governments and if Germany puts all its political weight behind him to replace Trichet then he will get the job even if he picks his nose."

"UNDERMINING ECB STRATEGY"

Business daily Handelsblatt has reported that Germany only agreed to a bailout for Greece on the understanding that Weber would become the next ECB chief.

France's Le Monde said this week that Paris was using support for Weber as a bargaining chip to secure German backing for a formal "economic government" of the euro zone based on regular summits of its leaders. [ID:nLDE64B0KR] [ID:nLDE64U0QR]

Italy's Il Sole 24 Ore, meanwhile, reported that Draghi's star was rising after Weber's public outburst against the bond buys on May 10, in a newspaper interview still proudly displayed on the Bundesbank's homepage. [ID:nLDE6492MP]

Although it is not the first public difference of opinion at the ECB, which seeks to forge consensus among its 22 policymakers for decisions, this one seems particularly acute.

"The splits haven't been as big as this in the past and haven't been what I would describe as fundamental," Societe Generale economist James Nixon said.

"You have got basically the two leading figures of the Governing Council arguably pointing in opposite directions."

"What Weber is actually doing is completely undermining the ECB's strategy," Nixon said.

Still, some see the former academic and German government adviser's comments as a useful balance.

"It's setting out checks and balances between Weber and the Trichet camp. In the end that suggests a pragmatic monetary policy but not one without principles," Dekabank economist Karsten Junius said.

BATTLE FOR PUBLIC OPINION

Trichet, who describes himself as the porte-parole of the Governing Council, has taken pains to learn German since moving to Frankfurt in 2003 but his hard-won language skills do not appear to have not helped in the public relations battle.

German newspapers greeted the decision to buy government bonds with dismay, Die Welt noting on its front page that the euro was no longer the same.

In a bid to regain control of public opinion, Trichet asked national central bankers on May 11 to stop speaking to journalists and let him do the talking, according to a euro zone central bank insider.

The ECB's subsequent media assault, stressing the purchases do not fuel inflation, involved 14 interviews by the six board members in two weeks -- an average of one a day, 10 of them in German media.

But the attempt has not succeeded in quashing concerns among citizens or investors, who have driven the euro to four-year lows against the U.S. dollar EUR=.

A survey published in Germany's best-selling Bild tabloid a week after the ECB decision showed almost half the country wanted the deutschmark back. [ID:nLDE64G1E5]

German news magazine Spiegel at the weekend reported that some Bundesbankers suspected a French 'conspiracy' given 25 billion euros of the 35 billion euros of the bonds bought so far under the aegis of Trichet -- a Frenchman! -- were Greek.

French banks have the heaviest exposure to Greece, according to Bank for International Settlements figures, and Spiegel said they were benefitting disproportionately from the purchases since German banks had promised to hold on to their Greek bonds.

Trichet denied the ECB was favouring French banks, saying in an interview with Austrian television the claim was "absolutely false". [ID:nDEP003317]

But adding to the conspiracy theories was a thinly-veiled swipe by ECB Executive Board member Lorenzo Bini Smaghi at Germany for using alarmist rhetoric to try to garner domestic support for Greek aid, in a rare foray into national politics. [ID:nFLASGE61O]

Deutsche Bank economist Thomas Mayer said it was "astonishing" for the ECB to criticise a specific government, as the ECB usually goes out of its way not to name names.

"Tensions that go along national lines are what the ECB has always tried to avoid," said Mayer, who agrees with Weber's concerns about the bond buying.

"It's astonishing how political the ECB is becoming, that's a bad development."

(Additional reporting by Marc Jones, Sakari Suoninen and Andreas Framke; editing by Paul Taylor)