Internal ECB politics will determine fate of euro, says Jens Weidmann
Baku, November 15 (AZERTAC). The most crucial decisions to be taken in the euro crisis now will be taken based on the internal politics of that non-political monetary technocrat institution, the ECB, Jens Weidmann, head of Germany’s central bank, the Bundesbank, publicly threw down the gauntlet yesterday (November 13) in an interview with the Financial Times.
Weidmann highlighted the stance being taken by the Bundesbank by arguing governments, not central banks, were mainly responsible for ensuring financial stability. Mario Draghi, the ECB’s new president , has said it is not the ECB’s job to act as lender of last resort, but Mr. Weidmann went further, saying such a step would breach Europe’s ban on ‘monetary financing’ - central bank funding of governments.
“I don’t want to speculate what would happen if somebody decided this way or another way. Regarding the role of the eurosystem, I will just confirm to you that we will act according to our mandate and provide liquidity to solvent banks and ensure price stability - this is our task. It’s the task of governments to ensure that banks in Greece are solvent. We provide liquidity to solvent banks against adequate collateral,” Mr. Weidmann argued.
Ultimately, the whole interview boils down to two words: “Moral Hazard”, even if unsaid: the ECB realizes that with each successful intervention it invites politicians to be ever more irresponsible in setting prudent fiscal policy because “the ECB will just come in and make it all better.” Now that it finds itself smack in the middle, the ECB has no choice but to set an example with one or two transgressors (replacing them with its own apparatchiks naturally), in hopes that European governments will finally set off on being fiscally responsible. Which they can’t, and that is the whole problem.
Other news in this section
