Richard North, 21/08/2012  

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Despite the evidence of there being an ongoing turf war between the Bundesbank and the ECB, the Ambrose piece in today's Failygraph offers the headline: "Germany backs Draghi bond plan against Bundesbank".

According to this legend, Jörg Asmussen, Germany's director at the European Central Bank has thrown his weight behind mass purchases of Spanish and Italian debt to prevent the disintegration of the euro, "marking a crucial turning point in the eurozone debt crisis".

With such an epoch-making event, one might have thought that it would be all over the German press. But there is narry a sign. In fact, Handelsblatt doesn't even have a front-page euro story today. Its business digest, however, tells us: "central bankers lose composure", while the story refers us to Süddeutsche Zeitung, which has: "unlimited bond purchases divide Germany and the ECB".

The reason why we are supposed to believe this is so important, though, is because Asmussen has friends in high places. He counts as his patrons both Merkel and Schäuble, despite being a member of the opposition Social Democrats. This certainly convinces Ambrose that the ECB is on the ascendancy.

To support this case, Ambrose cites Raoul Ruparel from the europlastics at Open Europe, who tells us that this is a "significant turning point". Asmussen, says Ruparel, "was hand-picked for the role by Merkel. It means that Draghi has managed to crack what seemed like a solid German wall".

Actually, it has been evident for some time that Asmussen has "gone native". The battle lines were drawn in late May, when Süddeutsche Zeitung (amongst others) was reporting a clear split between Merkel, in the national camp, and Asmussen, who was pushing the fiscal union line.

Despite  Ruparel's words of wisdom, nothing has changed recently to indicate that Merkel has warmed to the ECB "camp". Nor has anything changed since March, when Asmussen suffered a sharp rebuke from the Bundestag over his enthusiasm for European bailouts.

The lack of anything significant having happened  is reinforced by an article on Zerohedge which reminds that that the ECB is firing blanks – it doesn't have the money for large-scale bond purchases.

The real turning point could be, of course, the Karlruhe judgement on 12 September, but, says ZH, even if the court rules in favour of the ESM, the issue still remains that Germany will not permit the ESM to get a banking license, which means the ESM cannot buy banking bonds.

The point to note, though - perhaps the killer point -  is that Asmussen is responsible for the ECB's international and European relations, so he is bound to be talking up the Bank's line, supporting publicly anything that Draghi has to offer. PR is Asmussen's job. We have a PR man for the ECB, supporting the ECB line - shock!

Thus to regard his public advocacy for bond purchases as evidence of a fundamental shift in German policy might be going a little too far. Nevertheless, it is good enough for the children on the foreign exchanges. The euro has climbed to its highest level against the dollar in two weeks, nudging $1.241 for the first time since 7 August. 

The Failygraph story is being credited for causing the rise, says The Guardian, and is "another sign of market optimism that the European Central Bank will make mass purchases of Spanish and Italian debt". And this we should rely on? 

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