SocGen Chairman Slams German Minister’s ‘Shocking’ ECB Comments

(Bloomberg) -- Societe Generale SA Chairman Lorenzo Bini Smaghi said Germany’s finance minister crossed a line last week by appearing to undermine the independence of the European Central Bank.

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“I think it’s quite shocking,” Bini Smaghi, a former ECB Executive Board member, said in an interview in Sintra, Portugal on Tuesday. “The treaty says that politicians should seek to avoid putting pressure on the ECB.”

Christian Lindner said it could be illegal for the ECB to intervene if the French legislative election triggers a dangerous sell off in the country’s government bonds. President Emmanuel Macron’s surprise June 9 decision to call the vote unsettled bond investors, who demanded a wider-yield premium over German debt in an echo of the euro-area crisis more than a decade ago.

“The ECB has its own tools,” Bini Smaghi said on Bloomberg Television. “Clearly there are conditions to these tools.”

Lindner had said “a strong intervention by the ECB would raise some economic and constitutional questions.”

He referred to tools available to the central bank under its Transmission Protection Instrument “that have so far only existed as a press release.” Their use “would also test the German finance minister to see whether all this is still in line with treaty law,” he added. “That’s why I don’t want that.”

Bini Smaghi also said:

  • SocGen is contending with increased market volatility as a result of the elections and “in terms of investment, of consumption, behavior of our customers, I think they are waiting to see what the outcome is”

  • The actions of an elected government can differ from pledges while campaigning and politicians are mindful of the turmoil during the brief tenure of Liz Truss as UK Prime Minister

  • “One has to see that the markets are going to make their own discipline in any case and the ECB is there to do what it has to do”

  • “The markets have reacted slightly. We’re not concerned I would say, clearly the markets are doing their job, they’re assessing risks”

  • The election of governments that are more focused on domestic issues than Europe will make it more difficult to forge closer ties on financial markets, banking, energy and security in the region

Bini Smaghi added that previous challenges of ECB policies have failed in German courts and that the country has several pressing issues to deal with. “If I can give any advice to the German finance minister think about your own problems, you have enough I think in Germany,” he said.

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