BERLIN, July 31 (Reuters) - Germany’s finance ministry reiterated its view on Tuesday that there is no need to grant a banking licence to the euro zone’s new bailout fund, a move that could enable it to buy virtually unlimited amounts of debt issued by troubled euro zone states.
According to the treaty, the European Stability Mechanism (ESM) will not have a banking licence, a finance ministry spokeswoman said. “There is no need for it,” she added.
The German daily Sueddeutsche Zeitung, quoting European diplomats, reported earlier that supporters of the idea, long pushed by France, were gaining ground.
With a banking licence, the ESM - which is due to replace the current temporary baliout fund, the EFSF - could borrow cash from the European Central Bank and purchase bonds from heavily indebted countries such as Spain or Italy.
The article caused several members of Chancellor Angela Merkel’s centre-right coalition to reiterate their fierce opposition to the idea, which they fear could fuel inflation and jeopordise the ECB’s independence.