German Chancellor Angela Merkel supported and justified the European Central Bank's (ECB) decision to buy sovereign bonds from countries with financing problems, the so-called OMT (outright monetary transactions), because it is within its mandate.

Commenting on Jens Weidmann's opposition to the plan, Merkel explained that the Bundesbank president was worried about the plan's sustainability but that there was nothing wrong with having different opinions.

Merkel reiterated that monetary policy was not a substitute for fiscal policy, adding that reforms were the best way to control deficits and yield spreads. "One has to absolutely distinguish between the fiscal policy, that we as governments undertake, and the monetary policy which the ECB makes," she stressed.

Merkel opined Germany's negative yields were a sign of a "systematic problem" in Europe and that Germany's strength was not unlimited. "Germany cannot sacrifice exports to repair Eurozone imbalances," she said and added that the situation would be worse without German exports.

The German Chancellor also reiterated her opposition to Eurozone bonds because shared burdens must go hand-in-hand with shared controls. She agreed with the view of Finnish central bank governor Erikki Liikanen that crises like the current one tend to last almost a decade.

Four to five years into the crisis, there is still some way to go.

MG

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