The governing council of the European Central Bank is meeting this morning in Frankfurt amid speculation that it will decide to resume the purchase of Spanish and Italian bonds.
Bundesbank president Jens Weidmann warned European Central Bank governors he will defend Germany's culture of price stability "with all means and at all levels".
Expectations are high that today's Frankfurt meeting will see the ECB crank up its sovereign bond buying programme, started in March 2010 but idle since March, to drive down borrowing costs for Spain and Italy.
A week after ECB president Mario Draghi promised to do "everything necessary" to defend the euro, the Bundesbank said Mr Weidmann's remarks, posted yesterday on the German central bank's website, were an 11th-hour riposte to the ECB head.
With Spain and Italy under sustained pressure on financial markets, Mr Weidmann said the Bundesbank faced "more pressure than ever before" to back crisis-fighting measures it finds of questionable legality and limited effect.
Adding to the pressure yesterday was International Monetary Fund chief Christine Lagarde's insistence that "more can be done" in Europe to head off euro zone – and worldwide – recession.
Mr Weidmann warned of "overburdening" central banks such as his, aware that, technically, he represents just one vote that could be overruled at today's meeting.
He sent a warning flare in Mr Draghi's direction yesterday that such a standoff could erode further German public support for the euro – already a minority view – and eventually come back to haunt the ECB.
The Bundesbank was "not just one of 17 central banks" in the euro zone, Mr Weidmann said, hinting it would not look on indefinitely as the ECB pursues a strategy German economists see as outside its mandate.
"We are the biggest and most important bank in the euro system and continue to have entitlements and demands that go further than some other central banks. Whether it's interest rates or special measures, it always ends the same way: with the central bank expected to follow goals of fiscal policy," he said.
The last Bundesbank president resigned in protest at bond-buying and Mr Weidmann has made little effort to disguise his displeasure at the policy he feels comes close to financing of government debt – forbidden under ECB rules.
Mr Weidmann and other fiscal hawks fear renewed bond buying would undermine both their influence and the political independence of the ECB.
Rising political expectations of the ECB were not, Mr Weidmann suggested, matched by political willingness to drive on closer European integration on political, fiscal or banking fronts. Recent talk of a banking union made sense, he said, only if "accompanied by a wide-reaching reorganisation of national regulators and room to manoeuvre at national level for economic and finance policy".
Economists warned yesterday expectations may be dashed today.
"Draghi has placed the hurdle so high in the market that he is almost doomed to pass under it. The ECB will not, after all, begin an unlimited buy-up of bonds, which is the dream of many traders," said Deka bank economist Ulrich Kater.
