By John O'Donnell and Michael Shields
FRANKFURT/VIENNA (Reuters) - European Central Bank policymaker Ewald Nowotny on Friday backed ECB President Mario Draghi on steps to revive the euro zone economy with new stimulus, while Germany firmly maintained its opposition to buying sovereign bonds.
The support of Nowotny, Austria's central bank chief, may prove crucial for Draghi as he seeks to expand the scale of ECB action next year, most likely including quantitative easing (QE), the printing money to buy government bonds.
Draghi said on Thursday the ECB would decide early next year whether to take fresh action to revive the economy, and said the bank's Governing Council would not need to be unanimous to begin sovereign bond buying.
Indeed, central bank sources say a change in wording to firm up language on Thursday about the expansion of the bank's balance sheet already came over the objections of the two Germans on the ECB, Bundesbank chief Jens Weidmann and ECB policymaker Sabine Lautenschlaeger.
Nowotny, who central bank sources say opposed an ECB decision earlier this year to buy bundled debt known as asset-back securities (ABS), swung in behind the ECB president on Friday.
"The position of the Austrian National Bank is in line with what Draghi said in his opening remarks," Nowotny told a news conference in Vienna.
"The goal is for the ECB balance sheet to expand to counter a trend towards sinking inflation and growth weakness," he added. "How exactly that will happen will be decided next year. The next steps are to be decided in the first quarter of next year."
The ECB has set itself a goal of expanding its balance sheet by buying assets from banks and others in return for cash it hopes will be pushed into the economy -- by up to 800 billion or even 1.0 trillion euros (793.28 billion pounds).
Buying sovereign bonds through QE would help it achieve that target.
The ECB discussed a bond purchase programme with a volume of more than 1 trillion euros at its meetings this week, German newspaper Frankfurter Allgemeine Zeiting reported on Friday.
Nowotny said there was no detailed list of what would keep the ECB from acting, but factors to watch included the overall economy, how euro depreciation was affecting exports, and whether bank lending was picking up.
GERMAN OPPOSITION
In Frankfurt, the Bundesbank's Weidmann laid bare the entrenched German opposition to buying government bonds.
Such quantitative easing, although used in the United States and Japan, might not work in Europe, Weidmann said.
"You cannot simply apply the same formula in Europe that has enjoyed success in the U.S. … or in Japan," he said. "In the USA, there is a central state that issues bonds that are very safe and secure. We don't have that central state here."
He also said that making it overly cheap for countries to borrow could discourage them from reforming.
Italian media reported that six or seven members of the ECB's 24-strong Council opposed the decision on Thursday to firm up language on the expansion of the bank's balance sheet.
Weidmann's opposition to more expansive ECB stimulus measures comes despite the Bundesbank halving its 2015 growth forecast for Germany on Friday and also trimming its estimate for this year.
German Finance Minister Wolfgang Schaeuble, speaking at a conference with Weidmann, said expansive monetary and fiscal policies were a cause of economic woes, not a solution to them.
Commenting on the idea that economic weakness required an expansive monetary and fiscal policy, Schaeuble said: "I am not convinced of this. Rather, I am of the view that this approach is not the solution, rather the cause (of economic woes)."
(Written by Paul Carrel Editing by Jeremy Gaunt)