AFP, Reuters/Frankfurt
Bundesbank President Jens Weidmann warned French President-elect Francois Hollande yesterday against tampering with the European Central Bank or the EU fiscal pact. He also reminded Greece that it would have to respect its commitments or risk having its bailout aid suspended, in an interview with the daily Sueddeutsche Zeitung. “Any modification in the statutes (of the European Central Bank) would be dangerous,” Weidman said when asked about Hollande’s proposal during his electoral campaign to allow the ECB to take measures to support the economy or lend directly to states. “Jobs and economic growth are the result of trade. The central bank is best placed to contribute to the stability of the (European) currency,” he said. With regard to Hollande’s campaign pledge to re-negotiate the European fiscal pact, he said “it is clear that must be refused.” “There is a European custom that you keep to accords you have signed,” he said. The conservative Weidmann’s comments come ahead of Hollande’s visit to Berlin on Tuesday, just hours after he is sworn in, for talks with Chancellor Angela Merkel. Hollande said in his campaign that he would advocate measures to kickstart Europe’s sluggish economies. Weidmann said: “I know the new buzzword is ‘growth’ ... all experience has shown that too much debt is a handicap to growth. To combat debt with more debt just will not work.” The ECB should stick to its mandate of preserving price stability and it would be “dangerous” to change the bank’s mandate, he said. Weidmann gave no indication that the ECB would intervene in the bond market again any time soon, but said it was still too early to withdraw the bank’s emergency support measures — a move that should be discussed nonetheless.The ECB has hardly made use of its bond purchase programme since Mario Draghi took over as president in November and has not bought any bonds for eight weeks in a row despite rising refinancing costs in Spain as it struggles to get its budget under control.“It is clear that the time for the exit has not come yet, but should not be missed either,” Weidmann said.“(The bond buying programme) is dormant, but can be re-activated. That is the situation, but you know my position,” said Weidmann, who opposes the programme, saying it ventures too far into the arena of state financing — a taboo for the ECB.Weidmann was also critical of any possible direct aid for eurozone banks from the European rescue fund.“To communitise risks without states giving up national sovereignty — this undermines the foundation for stability,” he said.With regard to Greece, he said yesterday there was “no German economic diktat. But if Athens doesn’t keep its word, it will be a democratic choice. The consequence will be that the basis for fresh aid will disappear.”“The donor countries also have to justify themselves toward their own population,” Weidmann said.And he shrugged his shoulders at the prospect of Greece reverting to the drachma, saying, “The consequences would be much worse (for Athens) than for the rest of the eurozone.I think it is too simple to think Greece’s problems would be solved by leaving the euro area.”Greece was plunged into turmoil after a general election boosted far-left and far-right groups, stripping mainstream parties that back a painful EU/IMF bailout of their parliamentary majority.On inflation, he stood firm. “It is a dangerous path, we must not repeat the errors of the 1970s. Inflation is socially unfair and will not get us out of the crisis.” It was the second day in a row Weidmann had quashed any idea, recently backed by Finance Minister Wolfgang Schaeuble, that Germany could live with a little more inflation in return for more domestic demand. “If, on the advice of the ECB, we keep watch to make sure that average inflation doesn’t rise above 2%, then inflation will not cross that threshold in Germany,” Weidmann told the Sueddeutsche Zeitung. “Our citizens can have confidence in the vigilance of the Bundesbank,” he added.