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Jens Weidmann: The euro balancing act

2019-06-20T16:18:38.580Z

Bundesbank President Jens Weidmann is committed to the bond purchases of the European Central Bank. Is that enough to become the successor to Mario Draghi?



A balancing act in the figurative sense is the attempt to bridge two opposing positions. Jens Weidmann has now tried such a balancing act. The controversial bond program of the European Central Bank (ECB) was "right", said the president of the Bundesbank yesterday ZEIT ONLINE. This was stated by the European Court of Justice.

The positions to be bridged by Weidmann are as follows: Anyone who wants to become President of the European Central Bank and succeed Mario Draghi in this position must be prepared to use the central bank's crisis instruments when the next crisis comes. This is the view of at least the majority of member states of the monetary union.

The bond program is perhaps the most important crisis instrument. Under this program, the central bank can, if necessary, buy government bonds of a member country, thereby preventing an excessive increase in interest rates. Anyone who does not admit to the program will not be nominated for the post by the heads of state of the euro countries.

On the other hand, Weidmann criticized exactly this program when it was passed - even before the Federal Constitutional Court. If he approves of it now, he would admit that his judgment was perhaps not quite correct at the time. That would be a problem for its credibility, especially in Germany.

Case done for him

Weidmann has tried with his statements, these two points of view to unite. As? By bringing in a third actor: the European Court of Justice. The Bundesbank president does not say that he is suddenly a fervent supporter of the program. He says that the decision on the legality of bond purchases should be made by the courts - and since they have decided, the case is sort of settled for him. The program is compatible with the mandate of the central bank, and so it can be activated in principle.

In other words, the instrument remains valid without Weidmann having to make a rhetorical turnaround. Will that be enough for the new job at the head of the ECB?

That's not to say, there are too many unknowns in the game. Germany will receive at most one of the top positions to be awarded in Brussels. If Manfred Weber becomes Commission President or the Green Ska Keller Parliament President, then the ECB will not go to a German.

But there are some developments going on that have at least increased the likelihood that it will be Weidmann. Weber probably does not find a majority in parliament, so he would be out of the game. Whether Keller prevails, is also unclear. If Germany does not get a top job, then that would be attributed to the federal government as a defeat.

Even within the grand coalition in Berlin speaks for Weidmann as ECB president. Although he is not a member of the party, he is perceived as close to the CDU. If he follows Mario Draghi, the SPD would probably play a role in filling the succession at the head of the Bundesbank - for the comrades one of the few opportunities to make policy decisions with personnel decisions. A possible candidate is Marcel Fratzscher, the head of the German Institute for Economic Research.

In this situation, Weidmann has made his remarks that he is now in talks, where the final decisions are pending. Angela Merkel will have his words in mind when today and tomorrow at the EU summit in Brussels, the first discussions on human resources will take place. In any case, in the Federal Government it is assumed that Weidmann, once he himself is the boss and no longer on the sidelines, would react in a crisis situation as flexibly as today's Draghi.

Source: zeit

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