Is a rift developing between the Bundesbank and the ECB?

I’m sure that there is some source for information about ECB politics, but I haven’t encountered it yet (maybe it’s in German). So I only know what I read in the papers about what’s going on there; I don’t have any backroom gossip. The latest ECB news is that it has once again lowered its collateral standards to allow PIIGS banks (i.e., Spain) to continue to have access to credit. It used to be that the ECB accepted only blue-chip assets; today there isn’t much that it won’t take.

The interesting development is that not only did the Bundesbank dissent from this decision, but that it did so publicly. What does this mean? It suggests that, to some degree, the Bundesbank may be losing influence at the ECB.

The ECB is controlled by a 23-member Governing Council which consists of the six members of the Executive Board, plus the 17 governors of the eurozone’s central banks. There are two Germans on the Governing Council, versus 21 others, including seven members from the PIIGS. In other words, voting on the Council does not reflect the financial resources or credit ratings of the member countries. The PIIGS plus France have nine votes (if you include Draghi) to Germany’s two.

I have to assume that Draghi, the ECB president, acts as the leader and consensus builder on the Council. Under pressure from France and the PIIGS, he evidently decided that maintaining the liquidity of the Spanish banks (downgraded today) was more important than collateral quality or keeping the Bundesbank happy. Presumably, the Bundesbank knew that it would be outvoted, so that it could take its principled stand without triggering the collapse of the Spanish banking system.