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New German central bank chief promises continued “stability culture”

Tuesday, May 3rd 2011 - 04:59 UTC
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Jens Weidmann (43) is the youngest president in the Bundesbank’s history Jens Weidmann (43) is the youngest president in the Bundesbank’s history

Germany’s Bundesbank new hawkish president Jens Weidmann said private investors should help cover costs of the Euro zone crisis. Mr Weidmann promised a continued “stability culture” at the German central bank after taking over from outgoing president Axel Weber.

“To put the currency union back on a solid footing, the rules have to be formulated so that national finance (players) and private investors are, in principle, prepared to answer for the consequences of their decision,” said Dr Weidmann, an economist and former student of Prof Weber.

“The shifting of financial burdens to third parties cannot appear to be an attractive path. Reforms agreed to date go in the right direction but fall short of tackling central points.”

He called for a rapid end to acute crisis measures which “worsen, long term, the incentive for responsible and risk-adequate behaviour”.

“There is not infrequently a conflict between what appeared wise short term and was introduced ad hoc and that which represents a goal-oriented and efficient framework for order,” he said.

“Short-term measures can, when taken over an extended period like medication, have considerable side-effects.”

Mr Weidmann (43) is the youngest president in the Bundesbank’s history. To minimise criticism of political influence over the bank – Mr Weidmann is Chancellor Merkel’s ex-economic adviser – the German leader did not attend the ceremony.

He said he would drive on the planned merger of the Bundesbank and the financial regulator, Bafin. Mr Weidmann will attend his first ECB governing council on Thursday in Helsinki.

ECB President Jean-Claude Trichet present at the Frankfurt ceremony said the financial crisis is not over and the economic environment remains demanding. He added that the ECB would continue to separate its non-standard policy measures - liquidity injections and bond purchases - from its standard measures, such as its interest rates.

“We are still living in a very demanding environment. The crisis is not over” Trichet said.

“The Euro-system has kept and will keep its sense of direction, strictly separating the standard measures, designed to deliver price stability, from the non-standard measures, designed to help restore a more correct monetary policy transmission mechanism,” Trichet added.

Categories: Economy, International.

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