One of the most important central bankers in the world has resigned.
Jens Weidmann announced this morning that he will resign after serving as president of the German central bank, the Deutsche Bundesbank, for more than a decade.
This is a move that can have a significant impact.
Since taking up the post, in May 2011, Weidmann has fought a stubborn and sometimes lonely campaign against what the European Central Bank (ECB) felt was too loose on its approach to monetary policy. ..
He once described cheap money as “addictive … like a drug.”
In doing so, Weidmann undoubtedly raised the concerns of millions of Germans who were fiercely resentful of the vast asset purchase scheme (“quantitative easing” in jargon) and the negative interest rates introduced by the ECB. It was clearly stated. Under former President Mario Draghi..
More recently, Wademan opposed the latter claim after Draghi was taken over by Christine Lagarde at the ECB. Incorporate the threat posed by climate change For both its economic forecasts and its stress tests.
Wademan argued that the fight against climate change should be a government issue, not an ECB.
Therefore, his resignation will remove the big thorns on Mr Lagarde’s side, as the governor of the Deutsche Bundesbank represents Germany on the ECB’s governing council.
Timing is also important.
With inflation beginning in all parts of the world, especially in the euro area, the debate over whether to tighten monetary policy has become less clear.
Lagarde’s resignation, which voted against the ECB’s proposal to keep interest rates at current levels until inflation stabilizes at 2% in July, could allow Lagarde to continue its ultra-loose monetary policy. Will be higher.
Announcing his departure today, the 53-year-old claimed he had made a decision for personal reasons.
However, a letter to Deutsche Bundesbank staff released today still hinted at his dissatisfaction with the ECB.
He writes: “Monetary policy has played an important and stable role throughout this period. [including the financial crisis, the eurozone sovereign debt crisis and the pandemic]..
“But many emergency monetary policy measures are also associated with significant side effects, and the ongoing crisis mode has shifted the monetary policy coordination system.”
He continued: “It’s important … not to lose sight of the expected inflation risk.
“And its extraordinarily flexible crisis response is only proportional to the emergency in which they were created.
“Stability-oriented monetary policy is possible in the long run only if the framework of the financial coalition guarantees unity of action and responsibility, monetary policy respects its narrow mission, and is not caught as a result of fiscal or monetary policy. Will be the market.
“This remains my firm personal belief, as well as the importance of monetary policy independence.”
In many respects, Weidmann struggles to stick to his beliefs.
His fierce opposition Quantitative easingGuarantees making him an enemy throughout Southern Europe and not taking over Draghi, based on his view that governments such as Greece and Italy will reduce pressure to adopt austerity policies to reduce budget deficits. bottom.
The resignation of Mr. Wademan, appointed by retired German Chancellor Angela Merkel, has also been a headache for Germany. Next government Even before it took office.
Wademan’s successor is expected to be a more acceptable person to the ECB’s ultra-loose monetary policy.
Jorg Kramer, Chief Economist at Commerzbank, a German lender, said today:
“The fact that Wademan usually didn’t win in his position could have played a role in his resignation.
“It is unlikely that the new German government will reappoint the president of the Deutsche Bundesbank, which is in conflict with the majority of the ECB council.
“In this regard, Weidmann’s successors are likely not very hawkish.
“This certainly does not increase the likelihood that the ECB will end its very broad monetary policy in the foreseeable future, even if inflation risk has risen significantly lately.”
Still, that outlook will surprise many in countries where long-standing fears of inflation date back almost a century. And ensure that the first major appointments made by the new German government are carefully watched.
Friedrich Heinemann, head of corporate tax at the influential Institute of Economic Research ZEW, said:
“Weidman is one of the few council countries to keep an eye out for overburdening monetary policy and not being too close to fiscal policy.
“2022 could provide a definitive test of whether the ECB takes the goal of fighting inflation more seriously than the finance minister’s interest in low interest rates and bond purchases.
“Weidmann will be missed here.
“The new government has great responsibility for nominating a successor.
“If Germany sent a monetary policy pigeon to the ECB’s governing council, it would be fatal,” he said.
Therefore, the decision will be difficult for the new government.
On the one hand, you’ll want to start with your European allies and your right foot by not appointing a boat rocker at the ECB.
On the other hand, you don’t want to risk alienating millions of German voters by appointing someone who seems too soft against inflation.
Britain-loving Wademan, who mentioned Agatha Christie, The Beatles, and Sir Winston Churchill in past speeches, said in a letter to a colleague that he would flip “new leaves,” but he did a higher-paying job. Is supposed to be. Go to.
He may also be allowed to want a quieter life.
Wademan ends after a stubborn campaign against the ECB’s approach to “addictive” cheap money | Business News
Source link Wademan ends after a stubborn campaign against the ECB’s approach to “addictive” cheap money | Business News