Fed bank boss wants deeper cuts

Author thumbnail
1 Jan, 2012 Updated Sun 1 Jan 2012 13:21 CEST
image alt text

German Federal Bank President Jens Weidmann has called on the government to make bigger budget cuts than planned so far, because of the country's "special responsibility" to the euro.


In an interview to be published in Monday's edition of the Tagesspiegel newspaper, Weidmann said, "As the stability anchor for the common currency, Germany carries a special responsibility."

The Bundesbank head welcomed the fact that the state significantly reduced its deficit last year, but said this was no time to ease off from such efforts.

Weidmann sees a particular problem in Germany's looming first instalment for the permanent euro bailout fund, the European Stability Mechanism (ESM), which has not only been raised, but brought forward to this year.

Finance Minister Wolfgang Schäuble is faced with the tricky decision of either financing the contribution – thought to be higher than €4.3 billion – by taking on new debts or by imposing bigger federal budget cuts.

Unlike the temporary European Financial Stability Facility (EFSF) currently in place, the ESM will have to be backed with its own capital.

But Weidmann also remained optimistic for 2012, since Germany's economic situation was "relatively favourable." For that reason, the top banker warned against "talking" the country into a credit crunch, pointing out the European Central Bank (ECB) would provide the banks with enough liquidity.

Weidmann also insisted that the Bundesbank would not be playing a more active role in the euro crisis by buying up state bonds from troubled countries.

DPA/The Local/bk



2012/01/01 13:21

Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.

Please log in to leave a comment.

See Also