Jens Weidmann

Europe's Reluctant Champion

Jens Weidmann DPA
Deeper fiscal integration may be on the cards.
  • Why it matters

    Why it matters

    A euro-zone finance ministry would limit the national sovereignty of member states, but potentially prevent future debt crises.

  • Facts

    Facts

    • The European Central Bank sets monetary policy, but the euro-zone member states have control over their national budgets.
    • European leaders from Francois Hollande to Wolfgang Schäuble have called for greater fiscal coordination to prevent the imbalances that led to the debt crisis.
    • Creating a euro-zone finance ministry would require E.U. treaty reform, ratification by 28 parliaments, a governmental conference and several referendums.
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    Audio

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Jens Weidmann isn’t known for being in agreement with his colleagues at the European Central Bank. Often the lone voice of opposition, the head of Germany’s Bundesbank regularly takes his case to the public through the media, slamming policies like the ECB’s massive bond-buying program.

Mr. Weidmann’s positions often made him the target of criticism in France, which supports a more liberal monetary policy to shore up heavily indebted southern European nations. When the German central banker arrives in Paris on Tuesday for the Franco-German economic and financial council, however, he can expect an unusually warm welcome.

That’s because, for once, Mr. Weidmann is publicly supporting more European intervention and not less. In an editorial in the German daily Süddeutsche Zeitung on Monday, he joined forces with his French counterpart Villeroy de Galhau to make the case for a European finance ministry.

According to the two central bankers, the euro zone is at a cross roads, facing a stark choice. The currency union can either give the 19 member states greater control over monetary policy, while demanding they adhere to strict rules, or it can push ahead with greater integration and centralization.

“If you loudly say 'no' all the time, you run the risk of not being included anymore.”

Anonymous source close to ECB

“A stronger integration seems to be the obvious way to restore confidence in the euro zone, as this would help the development of common strategies for state finances and reforms, and thereby encourage growth,” Mr. Weidmann and Mr. de Galhau wrote.

It’s hardly a new idea. Germany’s finance minister, Wolfgang Schäuble, and former ECB President Jean-Claude Trichet have long talked about a European finance ministry.

French President Francois Hollande, like his predecessor Nicolas Sarkozy, continues to advocate a common government for the currency union.

And the European Union’s five presidents – Commission President Jean-Claude Juncker, Council President Donald Tusk, Parliamentary President Martin Schulz, euro zone President Jeroen Dijsselbloem and ECB President Mario Draghi – have called for a common treasury.

Now that Mr. Weidmann has gone on the record and agreed with virtually everyone he’s butted heads with in the past, the divisive idea of centralizing the euro-zone’s finances has cross-factional credibility.

Still, establishing a European finance ministry in the near term is politically impossible, according to Elmer Brok, a European parliamentarian for Germany’s center-right Christian Democrats.

“For that, we need E.U. treaty reform with a constitutional convention, a governmental conference, ratification in 28 parliaments and several referendums,” Mr. Brok told Handelsblatt. “It can’t be done before 2021.”

Mr. Brok suggested bypassing this cumbersome process by turning the European economic affairs commissioner and the chairman of the euro zone into a single post. This would provide stronger leadership for the currency union and greater oversight of member states’ budgets, Mr. Brok said.

The parliamentarian recommended E.U. Commissioner Valdis Dombrovskis for the job. Mr. Dombrovskis currently works on proposals to deepen integration in the euro zone.

Though establishing a full-blown European finance ministry is unlikely in the near term, Mr. Weidmann’s support for the idea shows a greater willingness to cooperate with his colleagues. Germany’s central banker is trying to shake his image as someone who’s always in the opposition.

“If you loudly say ‘no’ all the time, you run the risk of not being included anymore,” a source close to the European Central Bank told Handelsblatt.

The turning point in Mr. Weidmann’s approach was an event investors call “Draghi Day.” In December, Mr. Draghi disappointed markets when he issued a less ambitious stimulus program than expected.

As the markets tumbled, the euro zone’s central bankers carried out a contentious and very public debate about Mr. Draghi’s monetary policies. According to Handelsblatt’s sources, the ECB board subsequently agreed to present a more united front and play down their differences in public.

It’s unclear how long the truce will hold. In March, the European Central Bank’s monetary policies are up for review. In the face of low inflation, the central bank could increase the volume of its bond-buying program. Mr. Weidmann remains strongly opposed to any increase.

And Germany’s highest court will soon weigh the constitutionality of the bond-buying program. During the Constitutional Court’s first hearing three years ago, Mr. Weidmann sharply criticized the European Central Bank’s policies.

His colleagues felt he strengthened the central bank’s critics. Mr. Weidmann will testify before the Constitutional Court again on Tuesday.

It’s also unclear whether Mr. Weidmann will move beyond rhetorical support and actively throw his political weight behind a European finance ministry. In an interview with the daily Frankfurter Allgemeine Zeitung on Monday, Mr. Weidmann said the idea is mostly theory.

“I don’t currently see a political majority for such a central solution,” he told the newspaper.

 

Jan Hildebrand is the deputy Berlin bureau chief; Jan Mallien is a finance correspondent for Handelsblatt in Frankfurt; Ruth Berschens is Handlesblatt’s Brussels bureau chief. To reach the authors: hildebrand@handelsblatt.com, mallien@handelsblatt.com, berschens@handelsblatt.com.

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