Merkel and Rehn are warming to ECB’s bond-buying scheme

Ben Southwood
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GERMAN Chancellor Angela Merkel and Olli Rehn, the Finnish European Central Bank (ECB) policymaker, appear to be softening on ECB president Mario Draghi’s bond-buying plan, making the scheme more likely to go ahead.

Der Spiegel claimed yesterday that Merkel has switched from the chain theory, in which Greek is seen as a weak link which can be removed for a stronger Eurozone, to the domino theory, where a Greek collapse could be contagious.

And top ECB economist Olli Rehn told CNBC that “the [currency] is irreversible and it is essential that we...maintain the unity of the euro”.

This apparent change of heart from two former opponents will make bond-buying more likely, regardless of tomorrow’s verdict on the European Stability Mechanism from Germany’s constitutional court.

Meanwhile the Greek government, under Prime Minister Antonis Samaras, tried to haggle out a package of cuts with the troika, which is made up of inspectors from the IMF, the EU and the ECB.

There have been sticking points over various austerity measures, such as cuts to public employees’ salaries and state pensions.

But there was optimism from Italian leader Mario Monti, who told CNBC that his country will return to growth next year as interest rates decline.