BERLIN (REUTERS) - A leading member of German Chancellor Angela Merkel's Bavarian sister party criticised European Central Bank chief Mario Draghi on Saturday, saying he was turning the institute into a "junk bank" with his plans to buy debt rated as junk.
In a stinging attack, Hans Michelbach of the Christian Social Union (CSU) said Draghi was endangering the stability of financial markets. "Draghi is increasingly transforming the ECB into a junk bank," Michelbach told Reuters.
On Thursday, the ECB laid out plans to buy rebundled packages of debt and covered bonds, secured on solid assets such as property. It will include buying debt with a "junk" credit rating from Greece and Cyprus as long as such states are under a formal international financial programme.
Michelbach, who is chairman of the conservative faction in the parliamentary financial committee, said the ECB now wanted to buy the kind of "opaque debt" that was largely to blame for the outbreak of the global financial crisis in 2007/2008. "Draghi, a former investment banker, has not learnt anything in his role as head of the ECB. He was and still is the wrong person for the job," Michelbach said.
With its "Draghi politics", the ECB is helping countries that are not reforming, he said. "Draghi is ridiculing the people in Europe who have taken burdens upon themselves to shore up the future of their countries by means of reforms," Michelbach added.
He said the planned purchases of debt, which the ECB hopes will boost lending and so boost the euro zone economy, would mobilise "not one single extra euro of loans" in the single currency bloc. "Draghi looks like he is at his wit's end and he's trying to cover it up by performing increasingly absurd pirouettes,"Michelbach said. "The ECB needs to change its policies so that they come back within the terms of the treaties."