Weidmann Criticizes ECB Risks

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The new German central bank (Bundesbank) president Jens Weidmann poses for photographers during a photocall at the Bundesbank headquarters in Frankfurt
Jens Weidmann, president of the Deutsche Bundesbank, poses for photographers at the German central bank's headquarters in Frankfurt on May 2.

The euro traded steadily at $1.3056 at 8:00 GMT on Wednesday morning despite an interview with Bundesbank chief Jens Weidmann which shook investor confidence in the eurozone.

Weidmann reported that the German central bank was setting aside almost 7 billion euros because of the European Central Bank's risky decisions in 2012, namely the still unused bond buying plan.

Weidmann opposed the plan back in September when it was originally introduced, and reiterated his concern on Tuesday by saying governments need to improve their own economies by fixing root problems rather than tapping the ECB for aid.

Reuters reported that Weidmann also stressed that the crisis was far from over, and that countries like France, Italy and Cyprus were adding to an already detrimental lack of confidence in the region. He was especially critical of France, saying the nation has “floundered” in its reform course at a time when the nation should be leading by example.

Weidmann also addressed the issue of how to ensure the benefits of ECB policies filter out to every country in the 17 nation bloc by saying that this is not the responsibility of monetary policy, but individual governments. His tone was a stark contrast to that of ECB President Mario Draghi, who recently said his top priority was to make sure that low interest rates make their way to every eurozone country.

Germany continued to expand during the first two years of the eurozone crisis, but in 2012 the region's financial problems caught up to the power house economy and slowed growth. But despite a contraction in the fourth quarter of 2012, most economists think Germany will avoid a recession.

 

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