According to Bundesbank President Jens Weidmann, short-term financial assistance can only buy Greece time. In an interview with the news agency Reuters on the sidelines of the meeting of the G20 finance ministers and central bank governors in Istanbul, Weidmann said that Greece could only solve its problems in the long run by making its public finances solid and its economy more competitive. Weidmann emphasised that, above all, Greece "needs to make credible efforts to improve the situation so that it can get back on its own two feet." Given the solidarity shown thus far, calls from euro-area partners for Greece to make such efforts were justified, Weidmann told Reuters.

The Bundesbank President also made it clear that Greece's commercial banks should not use emergency liquidity assistance (ELA) loans, which the Greek central bank can grant them in the event of a liquidity bottleneck, to purchase sovereign bonds. Weidmann stressed that "under no circumstances must the Eurosystem expose itself to the suspicion it is involved in prohibited monetary financing of states". ELA can be granted to banks even if they do not hold collateral that meets certain minimum requirements that are normally obligatory in standard refinancing operations with Eurosystem central banks. However, banks can only receive ELA as long as they are financially sound.

Strict criteria

At a joint press conference with Federal Finance Minister Wolfgang Schäuble after the G20 meeting, Jens Weidmann said that strict criteria should be applied to the short-term provision of ELA. He explained that banks and the government were closely interlinked in Greece, too, meaning that the solvency of banks ultimately also depended on the economic and fiscal policies pursued by the Greek government.

In light of the political changes in Greece, the President of the Bundesbank also put forward the view that the policy of the new government in Athens might currently be unsettling the financial markets. However, should the crisis in Greece flare up again, the risks to financial stability for the rest of the euro area were lower than a few years ago, he told Reuters in the interview. He added that the indirect contagion effects were also likely to be smaller because any future financing difficulties in Greece would be perceived as problems of the country's own making and not as an indicator of similar problems in other euro-area countries. "But it is in everyone's interest that Greece sticks to its agreements and that the issue of risks to financial stability does not arise," said Weidmann.

Strong growth in private consumption

At the joint press conference with the Federal Finance Minister, Jens Weidmann also addressed the economic situation in Germany. He pointed out that the German economy showed solid growth of 1.6% in 2014 and that the economic indicators remained favourable. "Consumer confidence, in particular, improved towards the end of the year and is now at its highest level in 13 years; employment is increasing and wages are rising, especially in real terms," Weidmann announced in Istanbul. The sharp fall in oil prices had been a driving force behind the strong growth in private consumption, he continued. Weidmann was optimistic about economic growth this year, saying that projections such as the European Commission forecast, which predicted GDP growth of 1.5% in Germany, gave an accurate reflection of the picture.

On the subject of the euro exchange rate, Weidmann told Reuters that he did not foresee any competitive devaluation in the global foreign exchange markets. Instead, he explained, exchange rate developments currently reflected "first and foremost the fact that the large currency areas are at different points of the economic cycle right now." This, he said, had led to different monetary policy stances. In the communiqué published by the G20 finance ministers and central bank governors following the meeting in Istanbul, the members promised to continue cooperating to ensure that the effects of their own policies on other currency areas were kept within limits. The members also pledged to stick to their previous exchange rate commitments and to resist protectionism.