* Says Thursday's decision on new policy measures not easy
* Now we must wait and see how the measures take effect
* Would be absurd to talk of new ECB measures already
By Erik Kirschbaum
BERLIN, June 6 European Central Bank Governing
Council member Jens Weidmann said there had been tough wrangling
within the ECB before the decision to ease monetary policy and
he said it would be absurd to start discussing further measures
The ECB cut interest rates to record lows on Thursday,
launched a series of measures to pump money into the sluggish
euro zone economy, and pledged to do more if needed to fight off
the risk of Japan-like deflation.
In an interview with Bild newspaper released on Friday,
Weidmann, who heads Germany's Bundesbank, said the ECB had had
to act because prolonged low inflation harms the economy.
"If the inflation rate is too low for too long, a
development looms that could damage the economy and harm all of
us," Weidmann said. "That's why we acted. We wrangled long and
hard about the shape of the measures. It was certainly not an
Weidmann said he would always work for price stability when
asked why he appeared to be switching sides all of a sudden and
backing a loosening of monetary policy.
"But that also means that the inflation rate should not be
allowed to sink too low," he said.
"Yes, the central bank is making a lot of money available at
low interest rates. But there is no flood of credit in the euro
zone. On the contrary.
"Banks are very reserved as far as lending goes and demand
for loans from companies is very weak in a number of countries.
We did what we could to revive that. The decisive thing is that
the economy in the euro zone gains some traction now."
Weidmann also said it would be wrong to start talking of
another round of ECB moves so soon after Thursday's decisions.
"The ECB has acted with a very broad set of measures. Now we
have to wait and see how the measures take effect. It would be
absurd to already start talking now about a further set of
Weidmann said that his position on the ECB's purchasing of
government bonds had not changed.
"The ECB cannot be allowed to become the 'bad bank' of the
euro zone and my position on buying government debt has not
changed," he said.
Weidmann rejected suggestions that lower interest rates most
benefit the struggling countries of southern Europe. Germany
also benefits from the lower rates, he said. When asked how, he
"Secure jobs, because German companies can borrow money on
extremely favourable terms. Affordable borrowing for homeowners
and skilled craftsmen. And when the economies in southern Europe
recover, that will also be good for German exports."
Weidmann said the ECB moves were aimed at promoting a swift
economic recovery that would allow rates to rise again.
"The inflation rate in the euro zone is low and that
protects consumers' purchasing power," he said. "At the same
time the interest rates on savings accounts are very low. The
ECB moves are ultimately aimed at making sure that is not a
permanent situation. A quick recovery in the euro zone is
important so that interest rates can rise again."
When asked when he thought interest rates would start rising
again, Weidmann said: "As soon as we see in our forecasts that
the phase of interest rates that are too low is ending, it will
then be time to start raising interest rates."
(Additonal reporting by Michelle Martin; Editing by Gareth