The German central bank also opposed the idea of the European Financial Stability Facility (EFSF) lending countries money at favourable interest rates to buy back their own bonds -- an idea supported by Greece.
Euro zone member states are looking to increase the effective lending capacity of the EFSF. Some have also discussed using the fund to buy the bonds of crisis-hit countries on the secondary market -- an idea the Bundesbank dismissed.
"The result would be to further relieve private creditors and national fiscal policies of responsibility and to burden taxpayers from financing countries with additional, possibly considerable risks," the central bank said in its February monthly report.
Issuing joint "E-bonds" or reducing the interest payments on aid to crisis-hit countries would "reduce the incentives for a solid fiscal policy and compromise important basic principles of the currency union" such as countries taking responsibility for their own public finances, the bank added.
The Bundesbank said the outlook for the German economy was positive, and that private consumption should support the economy in the coming months. Germany's public deficit could shrink towards 2 percent this year, it added.
source: REUTERS
