Jens Weidmann, the president of Germany’s Bundesbank, has publicly acknowledged that quantitative easing programme of European Central Bank (ECB) President Mario Draghi is within the bank’s mandate and a legitimate instrument to be used in times of crisis.
Weidmann’s statement is a major departure from his vehement opposition to Draghi’s flagship policy response. The former had previously attempted to block Draghi’s €2.3 trillion bond-buying programme, a measure that is widely credited for putting Eurozone’s growth back on track. Weidmann had, in fact, gone as far as challenging Draghi’s policy in the German Constitutional Court in 2012, undermining the “whatever it takes” pledge that was the order of the day at the time.
Weidmann now argues that he was not questioning quantitative easing, but was instead trying to underscore the perception of the ECB’s independence.
While Draghi is now announcing the extension of the programme in view of declining business confidence, Weidmann has been calling for a faster and more resolute rollback. In fact, Weidmann went as far as to question the systemic neutrality of ECB’s policy and subtly suggested, without evidence, that Draghi was effectively supporting the Italian economy.
Until 2017, Weidmann was siding with hawkish economists arguing that the ECB should drop the 2% inflation policy objective. But over the last two years, his position has been gradually moderated. In a speech delivered in Freiburg in 2018, Weidmann admitted that the root cause for stubbornly low inflation rates is the deep economic crisis a decade ago rather than the digitalisation of the economy.
“I am convinced that we should continue to aim for an inflation rate below, but close to, 2% over the medium term and should not raise doubts about the credibility of our monetary policy,” Weidmann was quoted saying.
As the date for choosing a successor to Draghi is nearing closer, there has been strong pushback against Weidmann’s candidacy, and it is anything but clear as to whether Chancellor Angela Merkel can see to it that her handpicked choice, Weidemann, is given the helm of the bank.
Italy’s powerful Deputy Prime Matteo Salvini openly objects to his appointment and has vowed to mount stiff resistance to his candidacy in order to thwart any further attempt by Germany to hold sway over key European institutions.
However, as all jobs in Brussels are up for grabs, the question arises as to whether Germany will, in fact, occupy a senior EU position. Manfred Weber’s nomination by the European People’s party is no longer a certain ticket to the Presidency of the European Commission and Germany is yet to hold the top role at the central bank.
The fact is that Weidmann still remains a polarising candidate. After he publicly changed his position, Draghi noted that the failure of certain national banks to communicate the ECB’s message to the public effectively had helped to stoke the rise of anti-European populism.