In an interview with Bundesbank chief Jens Weidmann, Der Spiegel starts off with a very tantalising question:SPIEGEL: Mr. Weidmann, US President Barack Obama reportedly asked German Chancellor Angela Merkel for your phone number. Has he already called you?
Weidmann: I haven’t received a call from President Obama. I occasionally talk on the phone with US Treasury Secretary Timothy Geithner, though. It’s an important part of my job to promote the positions of the Bundesbank during conversations with monetary and financial policy makers from around the world.
A few quick points on this:
- For American audiences totally unfamiliar with the story in Europe, Jens Weidmann (like all top German economists) is famously opposed to any kind of central bank backstopping of sovereign debt. The premise of the question is that Obama — who wants the crisis to go away ASAP — thought he could maybe get Wiedmann to come around.
- We don’t know what “report” Der Spiegel is referencing here. Maybe it’s just German gossip?
- If Tim Geithner can get through to Jens Wiedmann, does Obama really need to ask Angela Merkel for his phone number.
- Would Obama really think that he could sway Weidmann? That seems impossible.
Strange, but fascinating.
As for the rest of the contents of the interview, Weidmann is (surprise!) not so keen on the ECB buying up bonds of Eurozone nations.
Here’s a key chunk of that:
Weidmann: I also see no immediate threat of inflation. But if monetary policy allows itself to be used as a comprehensive political problem solver, its real objective threatens to recede increasingly into the background. Stable prices not only ensure that the market economy works better. They also create a foundation that companies looking to invest can use to make reliable calculations. They protect the financial assets of savers. They ensure that people can still live from their income tomorrow. In that respect, a stability-oriented policy is the best social policy.
SPIEGEL: That’s no different in the US. Nonetheless, to combat the financial and economic crisis, the US Federal Reserve has acquired large quantities of US government bonds without causing much concern. Doesn’t that influence your thinking at all?
Weidmann: The comparison is misleading. The Fed is not bailing out a cash-strapped country. It’s also not distributing risks among the taxpayers of individual countries. It’s purchasing bonds issued by a central government with an excellent credit rating. It doesn’t touch Californian bonds or bonds from other US states. That’s completely different from what we have in Europe.
SPIEGEL: How so?
Weidmann: When the central banks of the euro zone purchase the sovereign bonds of individual countries, these bonds end up on the Eurosystem’s balance sheet. Ultimately the taxpayers of all other countries have to take responsibility for this. In democracies, it’s the parliaments that should decide on such a far-reaching collectivization of risks, and not the central banks. Europe is proud of its democratic principles; they characterise European identity. That’s something else that we should bear in mind.
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