This applies not only to the euro zone, but also to other currency areas, said the head of the Bundesbank, who has repeatedly criticized the plans of the European Central Bank (ECB) to buy unlimited amounts of government bonds from problem countries. his japanese colleague can tell you a thing or two about this, said weidmann on friday in tokyo before the annual meeting of the international monetary fund (IMf) and the world bank.
"monetary policy is no panacea and no magic bullet."by stretching its mandate, an emergency bank can provide financial resources, but in doing so it also gets caught in the wake of fiscal policy. "ultimately, the causes of the crisis can only be eliminated by the governments," weidmann warned at a press conference with finance minister wolfgang schauble (CDU). This supports the ECB course. Schauble, however, had criticized the fact that the dispute in the bank of notes was also being played out in public.
Schauble and weidmann had previously attended the meetings of the finance ministers and central bank heads of the leading western industrialized countries (G7). According to schauble, the IMF’s annual meeting will also serve to "further dispel the lack of understanding" in the financial markets. "we will explain very intensively what we are doing, why we are doing it and why we are not doing it."
In his view, the participants at the meeting "took very positive note of the fact that we have made considerable progress in Europe" in overcoming the crisis. weidmann also said the message of this IMF meeting was that the economic, market-driven adjustment process in the euro area was underway. It was only the beginning, but there were successes.
The current account and budget deficits in problem countries have fallen. The current account surplus of the export nation germany, in turn, had halved by the end of 2011 since its peak in 2007, the Bundesbank chief said, referring to the debate on reducing global imbalances.
In view of the global economic slowdown, the head of the bundesbank warned against excessive pessimism. The global economy is currently in a difficult situation, he said. "but that’s no reason to paint a bleak picture."the german economy remains in a robust condition, but is feeling the effects of the situation in the euro zone. For the winter half-year, the Bundesbank expects an "economic sideways movement".
In addition to energy prices and the uncertainty caused by the euro sovereign debt crisis, weidmann also cited the feared effects of the impending tax increases in the u.s. and the drastic budget cuts that would automatically come into force as reasons for the gloomy global economic situation. The IMF had also warned of a relapse of the US economy into recession due to the fiscal cliff at the end of the year.
Schauble criticized the downgrading of Spain’s credit rating by the rating agency standard& poor’s (S&P). The decision was based on a misunderstanding fueled by "the creation of unrealistic or inaccurate expectations" in financial markets, he said.
S&P had justified the lowering of the credit rating of the fourth-largest economy in the euro zone from "BBB+" to "BBB-" among other things with doubts about the willingness in europe to communitize spanish bank debt. The background is plans for european banking supervision, which is a prerequisite for direct recapitalization of ailing banks in euro countries by the bailout fund. However, the desired banking supervision by the european central bank (ECB) is unlikely to be complete by january 2013. This is causing uncertainty on the markets.