Weidmann Declines to Comment on Bank Tenure as Tension Mounts
Bundesbank President Jens Weidmann declined to be drawn on whether he considered resigning over the European Central Bank’s plan to resume bond purchases, as tension between the two institutions mounts.
“I won’t comment on speculations,” Weidmann said in response to a report today in Germany’s tabloid Bild newspaper, when asked at a conference in Jackson Hole, Wyoming. Weidmann said he made his position clear in an interview with Der Spiegel magazine published Aug. 26.
Weidmann has considered quitting over the ECB’s plan to start a new round of sovereign bond purchases and discussed stepping down with the Bundesbank board, Bild said, citing unidentified people with knowledge of the situation. Weidmann, the only ECB council member opposed to the plan, has decided to remain in his post to defend his position at next week’s policy meeting, the newspaper said.
The euro declined to as low as $1.2493 today from $1.2520 overnight. The currency rose 0.7 percent to $1.2588 at 4:55 p.m. in Frankfurt.
The Bundesbank has become increasingly isolated as the ECB steps further into uncharted policy territory to combat the debt crisis. Axel Weber quit as Bundesbank president last year, partly over his opposition to the initial ECB bond-purchase program. ECB Chief Economist Juergen Stark, who was previously a Bundesbank vice president, resigned at the end of 2011 to protest the purchases, which he said blurred the line between monetary and fiscal policy.
Germany’s government urged Weidmann to remain in his post, Bild reported today. Chancellor Angela Merkel told ARD television on Aug. 26 she welcomes Weidmann’s input, lauding him for continuing “to make demands on policy makers.”
Weidmann has Merkel’s support, including for his efforts to secure the “widest possible” influence of the Bundesbank at the ECB, deputy government spokesman Georg Streiter said in Berlin today. Merkel is in regular phone contact with Weidmann, he added.
Today’s Bild report followed a defense of the plans by ECB President Mario Draghi in another German newspaper this week. Writing in Die Zeit on Aug. 29, Draghi hit back at Bundesbank opposition, saying: “it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools.”
Draghi’s plan, announced on Aug. 2, is for the ECB to intervene in the secondary market to lower yields in countries that ask Europe’s bailout fund to buy their bonds in the primary market. The central bank shelved its previous purchase program earlier this year.
‘Like a Drug’
“Some recent policy proposals in Europe have been quite constructive,” Federal Reserve Chairman Ben S. Bernanke said today in Jackson Hole. “I urge our European colleagues to press ahead with policy initiatives to resolve the crisis.”
Weidmann told Der Spiegel that a new wave of ECB bond buying may increase governments’ reliance on such funding and won’t help solve the debt crisis.
“We shouldn’t underestimate the danger that central bank financing can become addictive like a drug,” Weidmann said in the interview. “Such policy is too close to state financing via the money press for me.”
Asked if he would resign, Weidmann replied: “I can best live up to my task when I remain in office. I want to work to ensure that the euro remains as strong as the mark was.”
Klaus-Peter Willsch, a member of Chancellor Angela Merkel’s Christian Democrats who sits on the parliamentary budget committee, warned party members of the risk of Weidmann’s resignation in an e-mail, Handelsblatt newspaper reported yesterday.
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