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German banker worried about Irish deal

Tuesday, March 12 14:34:12

The so-called Prom Note deal the Government struck last month with the ECB shows how difficult it is for a central bank to escape the fiscal policy sphere once it has moved into it, the Bundesbank said today.

"This agreement shows how difficult it is to get free of the clutches of fiscal policy," Weidmann, a member of the ECB's policymaking Governing Council, told a news conference after presenting the Bundesbank's 2012 results.

The Irish government struck the deal with the ECB to switch a costly promissory note, used to pay for the rescue of failed Anglo Irish Bank, into less expensive sovereign debt.

The agreement was clinched despite ECB concerns that any deal given to the Irish Government to ease the cost of the Anglo promissory notes could set a precedent for other countries, such as Spain, which are also dealing with large bank debts.

Turning to foreign exchange rates, Weidmann said the ECB took account of these but that they are "not a policy goal".