FRANKFURT — The president of Germany’s powerful central bank reiterated his opposition to huge bond purchases Friday, potentially deflating hopes that the European Central Bank is preparing to intervene more forcefully in financial markets.
The comments by Jens Weidmann, president of the Bundesbank, muddied expectations that central bankers and government leaders were moving toward a broad agreement on how to finally tame the sovereign debt crisis, which threatens a global credit crunch.
“I don’t believe that the euro would be stabilized over the long term by ignoring constitutions and treaties,” Mr. Weidmann said during an interview. “The central bank is forbidden from redistributing debt obligations in massive amounts among the euro zone countries.”
Optimism about a solution to the debt crisis rose Thursday after Mario Draghi, the president of the E.C.B., made comments that were widely interpreted as opening the door to a European version of quantitative easing — huge purchases of government bonds to stimulate bank lending and growth. Signs of a grand bargain to save the euro, along with a drop in U.S. unemployment, helped push up major stock indexes in Asia, Europe and the United States on Friday.
A growing number of economists and policy makers argue that the crisis has become so large that only an overwhelming display of E.C.B. firepower will preserve the euro and avoid a global economic calamity. Even a relatively orderly breakup of the euro zone would be worse than the bankruptcy of Lehman Brothers in 2008, with European output plunging 12 percent over two years, according to a report this week by the Dutch bank ING.
Mr. Draghi had suggested Thursday that the E.C.B. would be willing to move more aggressively if European leaders took decisive steps to impose greater spending discipline on members and address the underlying structural flaws of the euro zone. Several key leaders have indicated they would be willing to deliver just such changes when they hold a summit meeting on Dec. 9.
Chancellor Angela Merkel of Germany, for example, called Friday for a “union of stability” able to enforce controls on individual European economies. “Where we today have agreements, we need in the future to have legally binding regulations,” she told the German parliament.
Mr. Weidmann has only one vote on the E.C.B.’s 23-member governing council, but it would be very difficult for Mr. Draghi to execute huge bond purchases — effectively printing money — without the support of Germany. Members of the E.C.B. governing council are extremely conscious of the need to maintain the consent and trust of euro-area citizens.
Mr. Weidmann’s views are widely shared in Germany and influential among political leaders, including Mrs. Merkel. Mr. Weidmann, 43, served as her economic adviser before becoming Bundesbank president in May.
“There is a clear message coming through that sets Germany against any form of debt monetization,” said Mark Cliffe, chief economist at ING Group in Amsterdam.
Mr. Weidmann declined Friday to comment directly on Mr. Draghi’s remarks a day earlier. But he said he did not believe his opinions were far apart from those of the E.C.B. president.
“Financing nations by printing money is absolutely incompatible with a monetary policy that guarantees price stability,” Mr. Weidmann said. By law, the European Central Bank is supposed to make price stability its top priority.
The E.C.B. did not respond to Mr. Weidmann’s comments. But Mr. Draghi made no effort Friday to correct or amend his remarks from Thursday, as he might be expected to if he thought he had been misunderstood.
In a speech to European Parliament members on Thursday, Mr. Draghi called for a “new fiscal compact” among euro nations, and suggested that if one materialized the E.C.B. might be willing to take additional steps.
The central bank has other tools at its disposal that would not meet opposition from the Bundesbank. For example, when the E.C.B. meets next Thursday, it is expected to broaden its support to euro-area banks by offering them unlimited, low-interest loans for as long as three years. So far the maximum lending period has been 13 months.
Longer loans would help banks that have had trouble raising funds on the open market by issuing their own bonds. That is a typical way that banks collect money to lend to customers, but bond issuance has plummeted because investors have become uneasy about the health of euro-area institutions. Two- or three-year E.C.B. loans would also help banks that have longer-term obligations that must be continually refinanced.
The E.C.B. demands collateral in return for the loans, but it accepts securities that have lost value on the open market, including bonds from Greece. Defenders of the bank argue that its liberal collateral policy amounts to a form of quantitative easing, because it allows institutions to convert devalued paper into cash that can be lent to customers.
In a sign of the squeeze facing banks, institutions borrowed €8.6 billion from the E.C.B.’s overnight lending facility Thursday, up from €4.6 billion on Wednesday. Banks must pay a punitive 2 percent interest rate to borrow E.C.B. funds overnight, and only do so when the need is urgent. The E.C.B. closely guards information about the identity of the banks.
The E.C.B. still has room to reduce interest rates as well. Many analysts expect the bank to cut the benchmark rate to 1 percent from 1.25 percent at its meeting on Thursday, and it could conceivably go lower in coming months. But Mr. Cliffe of ING said that it would be difficult to solve the debt crisis without huge bond purchases, in order to keep borrowing costs for Italy from becoming ruinous. “They need to do something to improve the liquidity of government bond markets and give Italy a chance to avoid insolvency,” he said.
As he has before, Mr. Weidmann said that the solution to the crisis lay with governments, who must win back the trust of bond investors by addressing the shortcomings in the design of the euro zone. Countries, he said, must be willing to cede some control over their spending policy by, for example, by agreeing to automatic tax increases if their budget deficits rise above limits agreed to by treaty.
If political leaders announce a credible plan this coming week, he said, “calm could quickly return to markets.”
Nicholas Kulish contributed reporting from Berlin
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