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What are the reasons for Weidmann leaving the ECB - What does his resignation mean for Greece?

Jens Weidmann announces resignation from German central bank for personal reasons

End of season for German central banker Jens Weidmann, who announced his resignation from the helm of the Bundesbank after 10 years.

Understandably, many are wondering why Mr Weidman chose to leave.

The German banker was the informal leader of the group of bankers who constantly reacted to the relaxed and supportive policy of the European Central Bank, restoring fears of inflation, even when the consumer price index changed negatively.

However, the fact that his ideas were not listened to may have played a role - along with the departure of Angela Merkel from the Chancellery.

If nothing else, his successor may be someone less "grumpy".

In this context, according to Commerzbank , a very expansionary policy is expected in the near future, although inflation risks have increased significantly in recent years.

In his resignation statement, Jens Weidman cited "some personal reasons" as the reason for leaving.

It is noteworthy, however, that monetary policy takes up "a lot of space" in its positions.

Jens Weidmann, for example, calls for more attention to be paid to the "side effects and, above all, the risks to financial stability" of lax monetary policy .

In addition, the ECB should not "unilaterally address the risks of deflation".

Finally, in view of the end of the PEPP bond purchase program decided during the crisis, he stressed that its "exceptional flexibility" should be commensurate with the "emergency situation" for which it was created.

This statement is important because there are other "voices" who want to maintain this flexibility even after the end of the PEPP program.

Overall, the Weidmann statement highlights once again the fact that his positions often do not reflect the views of the majority on the Board.

Certainly, the departure of the German central banker is a "pre-announcement" of the continuation of the current expansionary policy of the ECB , although the inflationary risks are intensifying.

Therefore, Christine Lagarde is not going to raise interest rates in 2022.

Instead, she will upgrade the APP program after the end of the PEPP market program in the spring of 2022.

In this way, she will continue to support heavily indebted countries, especially in the south of monetary union, such as Greece.

The letter to the Bundesbank staff

In his thank you to the staff, Weidmann makes special reference to the achievements they have achieved together: "The environment in which we operate has changed en masse and the role of the Bundesbank has been strengthened.

The economic crisis, the debt crisis and more recently the pandemic have led to long-term policy and monetary policy decisions.

The clear voice of the Bundesbank has always been important to me.

With extensive experience, the departments contributed to the discussions on the right lessons from the crisis and in the context of monetary union.

Significant regulatory changes have been adopted. The reorganization of banking supervision in Europe has not only led to completely new supervisory structures at the ECB, but also to a strengthened role.

The Bundesbank 's new responsibilities in the field of financial stability also underscore our central role when it comes to an operating financial system. "

Weidmann thanked his colleagues at the ECB for the productive atmosphere in difficult discussions at times, stressing the important and stabilizing role of monetary policy during the pandemic, as well as the successful completion of the strategy review as an important policy milestone in European monetary policy.

H revise the inflation target

O Weidmann refers to the revision of the inflation target. "A symmetrical, clearer inflation target has been agreed.

"Attention must be paid to the consequences and especially to the risks of financial stability," said the German central banker.

From now on - according to him - it is vital "not to look exclusively at deflationary risks.

Stability-oriented monetary policy will only be possible in the long run if the regulatory framework of the Monetary Union continues to ensure uniform action and accountability, monetary policy respects its role and is not involved in fiscal policy or financial markets.

That is my belief, as well as the crucial importance of monetary policy independence. "

Substitutes Among the candidates for Weidmann's position in the Bundesbank, Zeit cites Deputy Finance Minister J Κrg Kukis, a former Goldman Sachs executive, Ulrich Binzail, CEO of the ECB, Elga Barg Jens Weidmann's deputy, Claudia Buch. Merkel's regret Chancellor Angela Merkel, through her representative, Stephen Seibert, also expressed her regret for the departure of Jens Weidmann from the position of President of the Bundesbank.

"The Chancellor regrets Mr Weidmann's decision, but he also has great respect for it," Seibert said, noting that the outgoing central bank governor had "represented the Bundesbank in an excellent way, both nationally and international level". Mrs Merkel "thanks him for his work during these very difficult years in terms of monetary and fiscal policy".

It is now the task of the future federal government to find a successor, the government spokesman said. The procedure According to the relevant legislation, the federal government must nominate a candidate for the position, while the appointment is made by the federal president.

In the same vein, a spokesman for the finance ministry said, however, that the caretaker government now operates as required by restraint, implying that the new head of the Bundesbank will be elected by the next government.

Source: https://www.bankingnews.gr/

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