Bundesbank Warning

The Lonely Warrior

  • Why it matters

    Why it matters

    Next month the ECB’s rate-setting governing council, on which the hawkish Jens Weidmann sits, is due to decide whether to extend the bank’s controversial quantitative easing program.

  • Facts

    Facts

    • Since 2011 sovereign debt in the eurozone has risen from €8.5 trillion to €9.8 trillion.
    • Of the 19 countries that use the euro, 14 are failing to meet the requirements of a stability pact which stipulates that government debt should not exceed 60 percent of a country’s GNP.
    • By buying more than €1 trillion of government bonds, the ECB has become the largest creditor of euro-zone countries.
  • Audio

    Audio

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Key Speakers At Euro Finance Week
Jens Weidmann has been fighting a lonely battle for the last five years. Source: Getty Images

Jens Weidmann knew his job wasn’t going to be easy. After all, Germany’s Bundesbank president owes his job to the fact that his predecessor, Axel Weber, had thrown in the towel in the midst of the euro crisis.

Mr. Weber resigned because he didn’t feel German Chancellor Angela Merkel was supporting him sufficiently in the fight to stop the European Central Bank from buying the government bonds of heavily-indebted euro-zone countries. He stepped down, followed by another ECB board member, Jürgen Stark.

Since Mr. Weidmann took over in May 2011, he has repeatedly experienced how lonely life can be as the Bundesbank’s representative on the governing council of the ECB, the body which sets interest rates and broader monetary policy for the entire 19-nation euro zone. With a reputation as the most hawkish of the ECB’s council, he has few allies. Again and again, Mr. Wiedmann has failed to prevent moves to expand monetary policy in the currency bloc.

That hasn’t stopped him from trying. Mr. Weidmann has spent the past five years fighting tirelessly against debt mountains and floods of printed money that he believes are a danger not just to Germany but to the euro zone at large. In an exclusive interview with Handelsblatt, he warned that those risks are only likely to grow over time.

But there’s also a reason he hasn’t stepped down like his predecessor. Above his own convictions as a central banker, there is one thing that’s more important to him: The reputation and independence of the ECB.

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