Photo: (Photo by Sean Gallup/Getty Images)
We covered the impending showdown between the German central bank president and Mario Draghi, head of the ECB, over controversial measures to support ailing eurozone countries by buying their sovereign bonds.The German Bundesbank just posted an interview from an internal staff magazine with the central bank’s chief, Jens Weidmann, on their website.
Weidmann does not sound like he’s coming around to see Draghi’s point of view.
In the interview, Weidmann plainly states that “the central bank must use and maintain this protection [from political influence]. Furthermore, it should be aware that this independence also requires it to respect and not overstep its own mandate.” He also said that no one should expect the ECB to be able to help promote growth, reduce unemployment, or stabilise Europe’s struggling banks, because it’s just not part of the ECB mandate.
The interviewer asked Weidmann if he thought it was harder these days for the Bundesbank to assert its influence given that it’s only one of 17 member central banks in the ECB. Weidmann rejected the notion that the Bundesbank was less influential as part of the ECB pretty quickly:
Even though what you say is correct in terms of shares of voting rights, I certainly would not say that we are “just” one of 17 central banks. We are the largest and most important central bank in the Eurosystem and we have a greater say than many other central banks in the Eurosystem. This means that we have a different role. We are the central bank that is most active in the public debate on the future of monetary union. This is also how some of my colleagues expect it to be.
Next, Weidmann turned to the matter of economists and commentators who advocate inflationary policy from the ECB to weaken Germany’s competitiveness vis-a-vis peripheral nations, calling the idea “almost absurd” and saying that “Germany does not have to accept inflation rates which broadly unmoor inflation expectations merely to ensure that the average euro-area inflation rate remains just below two per cent.”
The last criticism Weidmann addressed was that Germany has benefitted so much from the monetary union that they have an obligation to help their neighbours in peripheral countries, calling that argument “incorrect,” saying that “Germany is already providing large scale assistance for the peripheral countries, not least as an anchor of stability and as a guarantor of the rescue packages.”
The markets are anxiously awaiting the ECB’s next meeting on Thursday – if their reaction to Draghi’s comments last week that the ECB would do “whatever it takes” to save the euro, they’re definitely hoping Mario Draghi wins out over Weidmann in the debate.