ECB criticism stems from blurred lines – Weidmann

17/5/2016

The European Central Bank’s extraordinary stimulus measures have drawn criticism because they risk overstepping the realm of monetary policy, Bundesbank chief Jens Weidmann has said.

Mr Weidmann, who has defended ECB president Mario Draghi against verbal attacks of late, said the “vehemence” of criticism leveled at Mr Draghi stemmed from the belief that “some of the measures we have taken so far, have blurred the boundaries between monetary and fiscal policy”, writes Mehreen Khan.

Speaking to Die Welt, Mr Weidmann said by purchasing around €60bn a month in government debt, the ECB was taking on the liabilities of its member states.

“I think the government bond purchases in the currency union is problematic, because the central banks are the largest creditors of their states,” he said.

The ECB has come under sustained attacks from German quarters for its move into negative interest rates, scrapping of the $500 bank note, and extension of quantitative easing to include corporate bonds.

A group of German academics and businessmen are due to sue the ECB by appealing to the powerful German constitutional court over its latest stimulus plans.

Mr Weidmann also dismissed any talk of “helicopter money” – a policy where a central bank could distribute money straight into the hands of consumers. Such measures are described by economists as clear move into fiscal policy from central banks.

Describing his relationship with Mr Draghi, the German central banker struck a conciliatory tone, saying:
We may sometimes come to different conclusions on difficult issues but when it comes to the importance of price stability and the economic conditions for that, we agree.

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