November 20, 2013 / 10:11 AM / 6 years ago

Printing money not the way out of crisis, ECB's Weidmann says

FRANKFURT (Reuters) - Printing money is not the way out of the euro zone crisis, European Central Bank policymaker Jens Weidmann said, resisting the possibility raised by others at the ECB of buying assets to aid a weak recovery.

Two senior ECB policymakers have said in the last week that asset buying - or quantitative easing (QE) - is a policy option to bring inflation closer to the ECB’s target, and financier George Soros threw his weight behind the idea on Wednesday.

But Weidmann, chief of Germany’s Bundesbank and leader of the hawkish camp of policymakers on the ECB’s Governing Council, pushed back against the idea of the central bank pumping more money into the euro zone economy.

“We have lowered interest rates and are offering banks unlimited liquidity. But there are no easy and quick ways out of this crisis,” he told German weekly Die Zeit in an interview to be published on Thursday.

“The money printer is definitely not the way to solve it. It will still take years until the causes of the crisis are eliminated.”

On Tuesday, the Paris-based Organisation for Economic Cooperation and Development (OECD) called on the ECB to emulate U.S.-style quantitative easing to help the single currency area avoid a deflationary spiral like that seen in Japan.

The ECB’s economics chief, Peter Praet, who first put the possibility of QE on the agenda last week, also said on Tuesday there was no risk of deflation visible in the euro area, and that inflation expectations were firmly anchored.

But Soros said the economic adjustment policies being pursued by some euro zone countries were deflationary.

“Economic policy that is currently being proposed is creating conditions of deflation which need to be resisted and the ECB is determined to do it,” the billionaire told a conference in London. “But without support from Germany, it will not be able to do it.”

Joerg Asmussen, the ECB’s other German policymaker, opposed a rate cut in May and this month. Asmussen sits on the ECB’s Frankfurt-based, six-man Executive Board, which forms the nucleus of the broader 23-man Governing Council.

Referring to Asmussen, Soros said, “you can see there is going to be a lot of resistance from Germany in taking the active monetary steps that the ECB would have to take to counteract deflation”.

Asmussen said on Tuesday the ECB could act again if needed to keep inflation in the euro zone on target.


A Reuters poll of economists found on Wednesday that the ECB was unlikely to embark on its own bond-buying program but would offer banks another wave of cheap cash early next year through long-term loans.

The ECB cut interest rates to a record low earlier this month and said it could lower borrowing costs further still. Weidmann said it was too soon to signal any further easing.

“The Council has only just eased monetary policy further, so I do not think it is sensible to immediately herald the start of the next round,” he said.

“Technically we are definitely not at the end of our possibilities. But the question is: what is sensible? The debate about further measures leads away from the real causes of the crisis.”

The euro zone’s prolonged crisis was rooted in a lack of competitiveness in some member countries, high government debt and troubled banking systems, he told the paper.

“Only politics can solve these problems, the central bank cannot,” Weidmann said.

Additional reporting by Carolyn Cohn in London; Writing by Paul Carrel; Editing by Catherine Evans

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