Germany objects to aid for indebted ECB states

Bundesbank President Joachim Nagel objected to the European Central Bank's promise of fresh support for the bloc's indebted south at an emergency meeting last month, reviving a divide between the ECB and its biggest shareholder, sources familiar with the matter told Reuters.

ECB policymakers pledged to buy more bonds from debt-laden countries at an unscheduled meeting on June 15 to contain a widening spread between their borrowing costs and Germany's as the central bank prepares to raise interest rates.

But Nagel disagreed with that decision, arguing that the ECB's focus should instead be on fighting high inflation, said three sources.

The virtual meeting was called with only a few hours' notice, meaning governors had little time to review preparatory documents and not all of them could attend.

ECB policymakers who have spoken since the meeting, including Belgium's Pierre Wunsch and the Netherlands' Klaas Knot, two key policy hawks, have backed President Christine Lagarde's pledge to fight fragmentation. This meant that Nagel's opposition was unlikely to prove an insurmountable hurdle.

Reuters