Bundesbank Chief Weidmann Quits Early With One Last Inflation Warning

By Reuters
Reuters
Reuters
October 20, 2021 Updated: October 20, 2021

FRANKFURT—Bundesbank President Jens Weidmann, a relentless critic of the European Central Bank’s ultra easy monetary policy, will step down more than five years early, opening the door for Germany’s new government to pick a less confrontational successor.

Weidmann said he would leave for personal reasons on Dec. 31, just days after the ECB must make a crucial decision on winding down pandemic-era stimulus that has revived growth but also pushed inflation to its highest rate in over a decade.

Among the most conservative members of the ECB’s Governing Council, Weidmann often found himself in opposition to fellow euro zone policymakers during his decade heading the German central bank.

He even warned about inflation risks in his farewell message to Bundesbank staff on Wednesday, saying: “It will be crucial not to look one-sidedly at deflationary risks, but not to lose sight of prospective inflationary dangers either.”

The successor to Weidmann, a former economic advisor to Chancellor Angela Merkel, will be picked by a new German government, to be formed when coalition talks conclude.

ECB-watchers said potential Bundesbank chiefs include Claudia Buch, currently Weidmann’s deputy, economists Volker Wieland, Marcel Fratzscher, Lars Feld, Lars-Hendrik Röller, and current Bundesbank chief economist Jens Ulbrich.

Isabel Schnabel, an ECB board member, is also a potential successor, although she would need to quit her current role, which some argue is a higher-profile job.

“Isabel Schnabel is doing a fabulous job at the ECB but I could think of no one better than Schnabel to lead the Bundesbank at this juncture,” UniCredit economist Erik Nielsen said. “Perfect background and experience, and outstanding European and global respect.”

Conflict

After taking charge at the Bundesbank in May 2011 as the euro zone’s debt crisis raged, Weidmann was frequently in a minority at the ECB, voting against major policy moves pushed through by ECB chiefs Mario Draghi and Christine Lagarde.

Epoch Times Photo
President of the European Central Bank (ECB) Christine Lagarde speaks as she takes part in a news conference on the outcome of the Governing Council meeting, in Frankfurt, Germany on Sept. 9, 2021. (Kai Pfaffenbach/Reuters)

In July, the 53-year-old was among a handful of policymakers that opposed the ECB’s pledge to keep interest rates at record lows until inflation stabilises at 2 percent.

While he has become less confrontational in recent years, his frequent criticisms made it difficult for the ECB to prop up public confidence in its policies and close a wide “trust gap” that opened up after the global financial crisis of 2007 on.

“A new Bundesbank president more in line with the ECB mainstream may make it easier to explain the rationale of ECB policies to the German public,” Berenberg economist Holger Schmieding said.

The ECB, the central bank for the 19 countries that use the euro currency, has battled with sluggish price growth for a decade, but inflation has risen sharply in recent months and data on Wednesday showed it hit 3.4 percent in September.

“I respect Jens Weidmann`s decision to step down from his position as President of Deutsche Bundesbank at the end of this year after more than 10 years of service, but I also immensely regret it,” ECB President Lagarde said on Wednesday.

By Balazs Koranyi and Francesco Canepa

Reuters