Schaeuble against ECB buying asset-backed securities

GERMANY’S finance minister has signalled his opposition to any move by the European Central Bank (ECB) to buy asset-backed securities (ABS) to help indebted states, telling his party it would amount to “covert state financing”, according to German magazine Der Spiegel.

The publication said Wolfgang Schaeuble made the comment during a meeting of his Christian Democrat party last Wednesday, telling those present the purchase of ABS by the ECB would infringe European rules.

German newspaper Die Welt, citing a central bank source, said last Wednesday that a majority of ECB governing council members seemed to be in favour of the central bank buying ABS.

However, ECB policymaker Yves Mersch said on the same day the ECB would not subsidise markets with asset purchases.

A spokesman for the German finance ministry said it never commented on internal party discussions.

At the start of the month, the ECB said that it had set up a task force with the European Investment Bank to assess ways to unblock lending to small and medium-sized enterprises (SMEs), for example by promoting a market for ABS based on SME loans.

ABS would allow banks to pass some credit risk on to other investors, enabling them to lend more and so potentially boost growth.

The move to promote ABS is controversial, particularly in Germany, as during the financial crisis some securities became toxic due to the default of the housing loans that underpinned them.