Weidmann: the often lonely ECB voice against easy money

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Germany’s Bundesbank President Jens Weidmann speaks throughout an economics convention in Linz, Austria, July 5, 2018. REUTERS/Lisi Niesner

  • Bundesbank chief Weidmann to step down early
  • Typically a lonely conservative voice on the ECB
  • Successor more likely to have much less hawkish view

FRANKFURT, Oct 20 (Reuters) – Bundesbank chief Jens Weidmann, who on Wednesday introduced his resolution to greater than 5 years early, led a decade-long battle contained in the European Central Financial institution in opposition to the easy-money insurance policies espoused by successive ECB presidents.

Again in 2012, the German central financial institution chief was the lone dissenter when the ECB unveiled plans to assist nations in misery after the worldwide monetary disaster, saying they had been “tantamount to financing governments by printing banknotes”.

In July, he was amongst a handful of policymakers who opposed the ECB’s pledge to maintain rates of interest at report lows till inflation stabilises at 2% as a part of efforts to stimulate a euro zone restoration after pandemic lockdowns.

With out naming him instantly, former ECB head Mario Draghi as soon as criticised a sure perspective of claiming “nein zu allem” – German for “no to every part”.

That left Weidmann an usually isolated-looking champion of German financial orthodoxy as Draghi’s “no matter it takes” insurance policies noticed the ECB purchase trillions of euros of bonds and push rates of interest beneath zero in a bid to revive inflation.

Weidmann’s often-aired concern has been that the move of low cost cash would inflate monetary bubbles and bankroll already extremely indebted euro zone governments.

Whereas many analysts would agree there’s some fact in that, the ECB argument has at all times been that such stimulus was very important to restoration from the monetary disaster that started in 2007 and which led the euro zone to the brink of collapse.

He adopted an identical line final yr when the ECB beneath Draghi’s successor Christine Lagarde launched its 1.85 trillion euro Pandemic Emergency Buy Programme (PEPP) as COVID-19 shut down a lot of Europe’s financial system.

“The primary ‘P’ in PEPP stands for pandemic, not everlasting, and for an excellent motive,” Weidmann stated solely final month of the bond buy programme, which is because of finish on March 31.


A speaker of fluent French and a few Italian, Weidmann was usually on the reverse finish of coverage arguments to his friends from southern Europe, with Dutch central financial institution head Klaas Knot his most frequent ally amongst policymakers from the “frugal north”.

Observers stated that regardless of his convictions, Weidmann was constructive in his criticisms of the ECB, which units financial coverage for the 19 nations that use the euro foreign money.

“For me Jens Weidmann has had a far more balanced method than earlier German central bankers,” stated Louis Harreau, euro zone economist and ECB strategist at Credit score Agricole.

“And the truth that more often than not, he remained constructive, regardless of his opposition, allowed the ECB to be extra proactive and extra environment friendly.”

In June, Weidmann shocked a central banking convention by softening his opposition to the ECB taking an lively function within the battle in opposition to local weather change by tilting its big purchases in direction of ‘inexperienced’ property, a shift championed by Lagarde.

Saying his resignation on Wednesday, Weidmann stated he would step down on Dec. 31 for private causes, and that it was time for him and the Bundesbank to show over a brand new leaf.

His farewell message to Bundesbank employees nonetheless lobbed a recent warning on the perils of inflation into the controversy about when and the way the ECB ought to begin to wind down its COVID-19 emergency stimulus.

The timing of his departure coincides with that of German Chancellor Angela Merkel, whom Weidmann suggested on financial issues earlier than being picked to run the Bundesbank in 2011. He was appointed for an additional eight-year time period in 2019.

His successor will likely be chosen by the brand new German authorities, more likely to be led by present finance minister Olaf Scholz, whose centre-left Social Democrats are in coalition talks with Greens and liberals after profitable final month’s election.

“The brand new German authorities will seemingly appoint a much less hawkish successor,” stated Berenberg chief economist Holger Schmieding. “Maybe (present ECB board member) Isabel Schnabel or someone with related mainstream views.”

Writing by Mark John; Enhancing by Catherine Evans


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