Weidmann warns against complacency in debt crisis -report

BERLIN Sat Dec 29, 2012 7:57am EST

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BERLIN Dec 29 (Reuters) - Bundesbank President Jens Weidmann warned against complacency in the struggle to overcome the euro zone sovereign debt crisis and also denied he had considered quitting due to differing views with ECB President Mario Draghi, a newspaper reported.

Weidmann told the Frankfurter Allgemeine Sonntagszeitung, in an interview to appear on Sunday, that the causes of the sovereign debt crisis have not yet been tackled and that he feared it would be dangerous if political leaders were to relax now.

"The causes haven't been removed," Weidmann told the Sunday newspaper in comments made available on Saturday.

It could be dangerous if crisis fatigue were to start spreading, he said, and "if political leaders decided they don't want to have anything to do with the crisis anymore and expect the central bank to save the day".

Weidmann said he did not believe the comments from Draghi that the ECB was ready to "do whatever it takes to preserve the euro" had marked a turnaround in the euro zone crisis. He added nothing had changed with regards to his dissent with Draghi.

"I fear the stability policy risks and the dangers of mixing monetary and fiscal policy," Weidmann said. He added: "The euro zone system cannot be allowed to get close to monetary state financing."

Weidmann said the period of low inflation rates could end quickly. "That can change if the economy picks up again and interest rates have to be raised," he said, adding that was why he considered it "extremely dangerous" that some were "talking about whether to allow a bit more inflation".

Weidmann also rejected the suggestion he had considered resigning due to his dissent with Draghi, as his predecessor Axel Weber had.

"What would that accomplish if all the Bundesbank presidents were to resign?" Weidmann said. "Then they would all keep resigning until someone came along to rubber stamp it all."

In a separate interview with Deutschlandfunk radio, the head of the German banking association (BdB), Michael Kemmer, said there had been many positive developments in the last year in fighting the sovereign debt crisis.

"We're certainly in better shape at the end of 2012 than we were at the beginning of the year," Kemmer said. "There were many positive developments in 2012, more and faster than one could have expected."

He said it was positive that European leaders had made a clear decision to help Greece stay in the euro zone.

"It was a smart decision," he said. "The solidarity community was kept in tact, and that is, I believe, the most important point as far as 2012 is concerned." (Reporting By Erik Kirschbaum; editing by Jane Baird)

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