5 Dec 2014
ECB Policy too loose for Germany – Weidmann
FXStreet (Mumbai) - Bundesbank chief Jens Weidmann, one of the leading hawks at the European Central Bank (ECB), said in an event hosted by the German newspaper Die Zeit in Frankfurt that the current monetary policy is too expansive for Germany.
Moreover, the Bundebank chief has been against the idea of QE in the Eurozone. “Buying up sovereign bonds with newly minted money is not the answer,” Weidmann insisted, adding that it might breach EU treaties. However, the breach of treaty argument was rejected by the ECB President Mario Draghi yesterday at the press conference.
Mr. Weidmann expressly stated that the policies used in Japan and elsewhere in the Eurozone cannot be implemented again. He further added that low interest rates in the Eurozone may result in governments loosing willingness to initiate structural reforms.
The hawkish comments, though hardly surprising, followed the Bundebank’s downward revision of German growth forecast. The Bundesbank now expects growth of 1.4% this year, down from 1.9% predicted six months ago. In 2015, the GDP is seen at 1.0%, compared to the 2.0% it forecast in June. For 2016, it has cut its forecast from 1.8% to 1.6%.
However, the central banker did state the German economy will pick-up soon. He said, “There is reason to hope that the current sluggish phase will prove to be short-lived.”
Moreover, the Bundebank chief has been against the idea of QE in the Eurozone. “Buying up sovereign bonds with newly minted money is not the answer,” Weidmann insisted, adding that it might breach EU treaties. However, the breach of treaty argument was rejected by the ECB President Mario Draghi yesterday at the press conference.
Mr. Weidmann expressly stated that the policies used in Japan and elsewhere in the Eurozone cannot be implemented again. He further added that low interest rates in the Eurozone may result in governments loosing willingness to initiate structural reforms.
The hawkish comments, though hardly surprising, followed the Bundebank’s downward revision of German growth forecast. The Bundesbank now expects growth of 1.4% this year, down from 1.9% predicted six months ago. In 2015, the GDP is seen at 1.0%, compared to the 2.0% it forecast in June. For 2016, it has cut its forecast from 1.8% to 1.6%.
However, the central banker did state the German economy will pick-up soon. He said, “There is reason to hope that the current sluggish phase will prove to be short-lived.”