FRANKFURT (MNI) – Chances of substantial sovereignty pooling in the
Eurozone in the foreseeable future appear slim, ECB Governing Council
member Jens Weidmann said during a discussion with former Bundesbank
President Helmut Schlesinger released on the German central bank’s
website.

The Bundesbank has always stressed that tighter political union
should be a pre-condition for further fiscal burden sharing. “When you
see how slight the readiness is in some countries to give up fiscal
autonomy – even in return for financial aid – then it is hard to image
that the political union will come in the foreseeable future,” Weidmann
said.

Weidmann cautioned that the central bank must remain conscious that
its independence obligates it to respect its own mandate and not to
overstep it even in the face of political pressures. “Whether it is
interest rates or non-standard measures, in the end it always comes down
to harnessing the central bank for fiscal policy purposes,” he said.

Weidmann warned that governments are overestimating the ECB’s
abilities by expecting it not only to ensure price stability but also
support growth, reduce unemployment and stabilize the banking system.

The head of the Bundesbank appeared unconcerned about inflation
developments in both the Eurozone and Germany. “If Germany as one-time
economic ‘sick man’ of the EU is now leading the European economy – and
the economic situation is the opposite compared with the first years of
monetary union – then this naturally also has an impact on the inflation
rate. However, this is a matter of decimal places, and in any case for
now we see a cooling off of price developments next year.”

Noting the “almost absurd debate” according to which a weakening of
German competitively would strengthen the deflation-threatened
peripheral countries, Weidmann argued that “however, if these countries
are undergoing adjustment processes that lead to declines in wage and
price developments, then these are one-time shifts in the wage and price
structure and not deflation.”

“Therefore,” he continued, “in Germany we must not accept inflation
rates with which inflation expectations broadly disanchor, just so that
in the center of the Eurozone the inflation rate continues to remain
close to but under 2%. But some demands from Anglo-Saxon countries are
aiming precisely at such a situation.”

–Frankfurt newsroom, +49-69-720-142; frankfurt@marketnews.com

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MGX$$$,M$G$$$]