Bundesbank President Jens Weidmann has welcomed the ECB Governing Council's decision to freeze the provision of emergency liquidity assistance (ELA) to Greek banks at its current level. "ELA is no longer being used to finance capital flight caused by the Greek government," Mr Weidmann told an international high-level Bundesbank conference in Frankfurt am Main, explaining that this shifted the responsibility to where it belonged: with the governments and parliaments.

Mr Weidmann's speech took a stance against a possible increase in the Eurosystem's provision of liquidity to Greek banks. Should further short-term assistance be considered necessary, it was up to politicians to provide it, he said. Central banks – although they had the means – had no mandate, in his opinion, to safeguard the solvency of banks and governments.

Doubts about the solvency of Greece's banks were legitimate and rising by the day, Mr Weidmann continued. "It needs to be crystal clear that responsibility for further developments in Greece and for any decisions on transferring financial resources lies with the Greek government and the countries providing assistance – not the ECB Governing Council."

Capital controls must remain in force

In his speech, Mr Weidmann advocated keeping capital controls in place in Greece for the time being. They needed to stay in force until an appropriate support package had been agreed by all parties and the solvency of both the Greek government and the Greek banking system had been ensured, he said.

According to Mr Weidmann, Greece showed in no uncertain terms that, despite the deeper integration that the crisis had brought about in Europe, the euro-area member states were ultimately still responsible for their own affairs. They could decide for themselves not to service their debts, to collect taxes inadequately or to lead their country’s economy into deep trouble.

Turning point in monetary history

"No one can say right now if these days will mark a turning point in European monetary history, challenging the irreversibility of euro membership or heralding the move towards a transfer union," said the Bundesbank President.

Mr Weidmann told his audience that he saw the ever-growing expectations placed on central banks and the increasing role they played as more of a curse than a blessing. "Undoubtedly central banks are powerful institutions, but they are well advised to stick to a narrow interpretation of their mandate if they wish to preserve their credibility and independence", he warned.