BERLIN Bundesbank chief Jens Weidmann has criticised a new debt deal for Greece agreed to by the country's international creditors at the end of last month.
In an interview with Germany's Welt am Sonntag newspaper, Weidmann, who sits of the European Central Bank's (ECB)policymaking Governing Council, said Greece's funding gap would be financed by new credits and for the first time by actual transfers from national budgets.
"Unfortunately the central banks are also not spared," he said.
Weidmann criticised the fact that Greece would meet part of its funding needs through auctions of short-term T-bills, saying this paper would mainly be bought by local banks, who in turn were largely financed through central bank means, complicating the ban on direct state financing.
The new deal aims to cut Greece's debt load to 124 percent of national output by 2020.
To reduce the debt pile, ministers agreed to cut the interest rate on official loans, extend the maturity of Greece's loans from the euro zone bailout fund by 15 years to 30 years, and grant a 10-year interest repayment deferral on those loans.
States also agreed to forego profits accruing to their national central banks from European Central Bank purchases of discounted Greek government bonds in the secondary market.
Weidmann said it could not be assumed that the measures really would bring Greece on to a sustainable debt path, however it was positive that international creditors had not opted for a further debt write-down for Greece.
"My position is that if we do need a future debt write down, then it should only be considered if Greece has fulfilled its reform path," he said. He added that the ECB should not volunteer to forego debt repayments as this would infringe upon the ban on state financing.
"If it was down to the Bundesbank then we wouldn't have bought any euro zone debt," he said.
"Then we wouldn't be facing this question. But what is still clear - is that central banks must never volunteer to waive debt repayment demands. This would be a clear infringement of the ban on state financing."
He repeated his opposition to the European Central Bank's decision to buy the bonds on the secondary market of highly indebted euro zone states.
Turning to plans for a banking union, Weidmann called for a change to the European constitution in order to avoid any conflict of interest between the European Central Bank's monetary policy and planned new supervisory duties.
"I cannot see how with the current legal framework we can transfer supervisory duties to the ECB. A clean legal solution would require a change to the constitution," he told the paper.
Such a change would require extra time and could delay the introduction of an EU-wide banking union. But he added: "If politicians really want a banking union, then they will be able to make the necessary political decisions swiftly."
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