Bundesbank President Jens Weidmann resigns

Lagarde wrote in a statement that she had “respect” for his decision. Weidmann and Lagarde had assured each other of their mutual appreciation on the phone: “Jens is a personal friend whose loyalty I could count on at any time.” He had a “clear stance on monetary policy”, but she was “impressed by his will to find compromises “.

According to informed sources, he has been considering the option of withdrawing since the decision for the ECB presidency was taken against him. Out of respect for Lagarde and then also because of the corona pandemic, he delayed the decision. Obviously, it’s about not attracting too much attention.

Weidmann has always insisted on separating monetary and financial policy

With his regulatory approach in the Governing Council, Weidmann felt himself to be in a structural minority. The outgoing Bundesbank president, who has always insisted on a clean separation of monetary and financial policy, is particularly concerned about the decision on the PEPP pandemic emergency program due in December. According to the current plan, it runs until the end of March and offers the ECB particularly flexible options to buy government bonds and thus support individual countries such as Italy.

Should this flexibility be retained after the PEPP expires, that would be a regulatory problem from Weidmann’s point of view. In an interview with the Handelsblatt, he emphasized that an emergency option had to be ended when the emergency was over.

In the letter to the employees, he demands “not to look one-sidedly at deflation risks, but also not to lose sight of prospective inflation risks”. A “stability-oriented monetary policy” will only be possible in the long term if the regulatory framework of the monetary union continues to ensure the unity of action and liability, monetary policy respects its narrow mandate and does not get caught up in fiscal policy or the financial markets.

Weidmann felt increasingly isolated

Weidmann has always tried to constructively participate in decisions of the ECB, for example in revising the inflation target or how monetary policy can take climate policy more into account, it is said from his environment.

However, the compromises reached have repeatedly been postponed or reopened. In addition, the Bundesbank President recently felt increasingly isolated in the Governing Council. He was always alone with his reminders.

This is how his German colleague Isabel Schnabel has “comfortably set up” in the ECB Executive Board and is defending ECB policy. The Finnish central bank governor Olli Rehn has represented less and less stability-oriented Finnish positions and more and more the views of his colleagues. And the head of the Dutch central bank, Klaas Knot, may say something now and then, but he usually gives in.

All of this has increasingly frustrated Weidmann. Now another German central banker is supposed to try his luck in the Governing Council.

Berlin was also surprised by the decision

The news was received with surprise in Berlin. The Federal Ministry of Finance was only informed of Weidmann’s move on Wednesday morning, government circles said.

Finance Minister Scholz thanked Weidmann for his extraordinary commitment over the past ten years. “He not only had a decisive influence on monetary policy in Germany and Europe during this time, but also advanced the further development of the international financial markets.”

FDP leader Christian Lindner tweeted that Weidmann had for “a stability-oriented monetary policy ”, the importance of which is growing in the face of inflation risks. “With him was the German Bundesbank an important voice in Europe. The FDP recommends Germany continuity. “

Wanted: the first Bundesbank president

The successor to Weidmann is now to be discussed in the coalition negotiations between the SPD, the Greens and the FDP. Several names are circulating as possible successors.

In Berlin, many would like to see a woman at the top, because until now the Bundesbank has only been headed by men. And many other top positions in the country are also held by men.

An obvious choice would then be Bundesbank Vice President Claudia Buch. However, many in central bank circles and in Berlin have doubts as to whether it would be up to the task, so far it has been considered rather inconspicuous. An alternative would be Isabel Schnabel, who is currently on the Executive Board of the ECB and who attracts attention with speeches in which she defends monetary policy with verve. You can imagine many at the head of the Bundesbank.

However: with her, after Jürgen Stark and Jörg Asmussen, the third German board member in a row would retire prematurely from the management body of the European Central Bank. That would look a little unfortunate.

If the choice does not fall on a woman, Jörg Kukies (SPD) is considered an option. The State Secretary of Federal Finance Minister Scholz and former Germany boss of Goldman Sachs is considered an accomplished finance expert who is valued across all political groups.

His disadvantage: As a Scholz loyalist, he might be too close to the future Chancellor for the FDP. However, this did not stop Weidmann from becoming head of the Bundesbank. Ten years ago, Weidmann moved from the job of economic advisor in the Federal Chancellery to head the German central bank.

Also traded is DIW boss Marcel Fratzscher, whose name was mentioned in previous appointments such as the ECB board of directors, but which so far has always been empty. The economist once worked as head of the department for economic policy analyzes at the ECB, knows his way around monetary policy and maintains good connections with the SPD.

More: Jens Weidmann: New ECB inflation target is “clear and easy to understand”