THE BUNDESBANK’S new hawkish president Jens Weidmann said private investors should help cover costs of the euro zone crisis.
Mr Weidmann promised a continued “stability culture” at the German central bank after taking over yesterday from outgoing president Axel Weber.
“To put the currency union back on a solid footing, the rules have to be formulated so that national finance (players) and private investors are, in principle, prepared to answer for the consequences of their decision,” said Dr Weidmann, an economist and former student of Prof Weber.
“The shifting of financial burdens to third parties cannot appear to be an attractive path. Reforms agreed to date go in the right direction but fall short of tackling central points.”
He called for a rapid end to acute crisis measures which “worsen, long term, the incentive for responsible and risk-adequate behaviour”.
“There is not infrequently a conflict between what appeared wise short term and was introduced ad hoc and that which represents a goal-oriented and efficient framework for order,” he said.
“Short-term measures can, when taken over an extended period like medication, have considerable side-effects.”
Mr Weidmann (43) is the youngest president in the Bundesbank’s history. To minimise criticism of political influence over the bank – Mr Weidmann is Chancellor Merkel’s ex-economic adviser – the German leader did not attend yesterday’s ceremony.
He said he would drive on the planned merger of the Bundesbank and the financial regulator, Bafin. Mr Weidmann will attend his first ECB governing council on Thursday in Helsinki.
Italy’s Mario Draghi is tipped to succeed ECB president Jean-Claude Trichet.
“In the short term, the ECB may turn more hawkish,” said Klaus Baader, an economist at Société Générale in London.
“Draghi will want to show he’s not lax about inflation risks and the new members will keep their voices down, strengthening the influence of established hawks like chief economist Jürgen Stark.
Manufacturing grew in Germany and France last month, but weakened in Spain and Italy, raising fears about a two-speed recovery in the euro zone.
