Bundesbank President Jens Weidmann currently sees no need for monetary policy action. In an interview with the German daily newspaper Süddeutsche Zeitung, he stated that the euro-area economic recovery had stabilised and that the concerns about deflation, which had been overblown even at the beginning of the year, had continued to diminish. He added that, in addition, “we have now launched an unprecedented purchase programme [for bonds] which is still in the process of being implemented”. In response to proposals to expand the asset purchase programme, Weidmann noted that, as long as the monetary policy assessment is still valid at its core, monetary policy should not be driven by the ups and downs of isolated indicators. Since March 2015, Eurosystem central banks have been purchasing roughly €60 billion worth of assets, such as government bonds, every month.

© picture alliance / SZ Photo

At the same time, he warned in the interview that Germany should not become complacent despite the relative strength of its economy at the moment. “The current upswing, too, will come to an end one day,” he noted, explaining that Germany was facing considerable long-term challenges with regard to an ageing society, increasing competition from emerging market economies or the “energy U-turn”. To him, it all boils down to maintaining Germany’s culture of innovativeness and adaptability. He said that this “also includes testing out, for a change, the structural reforms we are recommending to other countries in Europe instead of turning back the wheel of time, as we appear to be doing in labour market and pensions policy”.

Migration and its opportunities

Demographic change means that Germany needs additional workers in order to maintain its level of prosperity. That is why, according to Weidmann, the current wave of migration also presents opportunities. He said that these opportunities “become all the more rewarding the better we are able to integrate into society and the labour market those who come here for good”. However, he also added that Germany would have its work cut out to cope with the influx of refugees.

Weidmann also commented on the relationship between policymakers and central banks. He believes it is wrong to use monetary policy to force policymakers’ hand. “That is something to be decided on and owned by governments and parliaments, as only they have the requisite democratic legitimacy,” Weidmann noted. “Nor is it our job to buy time for politicians.” The perception of such could result in the can of reforms being kicked further and further down the road, in his view. Weidmann explained that the flood of cheap money was not capable of sparking sustainable growth, and that its risks to financial stability, amongst other things, would grow over time.