A must read from Der Spiegel of the inside account of Axel Weber’s resignation.
Bundesbank head Axel Weber’s resignation has made one thing clear: The debate about the future of the euro has become intense — and bitter. Indeed, Chancellor Angela Merkel’s efforts at mandating strict monetary discipline for the euro zone may ultimately fail. And German euro skeptics may be gaining ground.
The Germans have been the anchor of a “hard” Euro. Der Spiegel reports,
But then last May the ECB, in an effort to save the euro, decided to buy up government bonds of highly indebted countries like Greece, Portugal and Ireland. In Weber’s view, this was a serious violation of the ironclad principle that money should not be printed to finance government debt. In addition to criticizing the measure internally within the ECB council, Weber took the unusual step of making his reservations public. In doing so, he not only incurred the wrath of ECB President Trichet (“There is only one ECB statement, and it comes from me”), but he also ran afoul of most other members of the ECB governing council.
Finland’s Central Bank President, Erkki Liikanen, now appears to be the favorite to head the ECB. We look for continued selling in the Euro here.