In the course of the current sovereign debt crisis, strong doubts have occasionally arisen as to whether individual euro- area member states are capable of servicing their government debt or whether they are implementing the necessary measures at the political level. At times, risk premiums on the respective government bonds rose sharply and the credit assessments of the major rating agencies were downgraded considerably. This situation prompted the euro area to agree various assistance measures. While such measures were generally subject to consolidation requirements, they nevertheless imply a substantial mutualisation of sovereign solvency risks without being counterbalanced by a corresponding transfer of sovereign powers to the central level.
Dr. Jens Weidmann,
President of the Deutsche Bundesbank
Crisis management and governance
Walter Eucken Lecture
Ladies and gentlemen
I am delighted to be here today to give the Walter Eucken Lecture.
And I am delighted that so many of you have come today on Rose Monday, the highlight of the German carnival season before the beginning of Lent, to listen to a monetary policymaker.
Monetary policymakers do not have the reputation of being over-blessed with a sense of humour – there is therefore some doubt about our suitability for the carnival season. On the other hand, the immunologist and humourist, Gerhard Uhlenbruck, said that, at carnival time, we wear a mask so that we can let it slip. I will certainly not be putting on a mask and under no circumstances will I attempt to give an amusing speech.
Interview with Jens Weidmann, President of the Deutsche Bundesbank with the newspaper Frankfurter Allgemeine Sonntagszeitung, published on 2012-12-30
Interview conducted by Rainer Hank and Christian Siedenbiedel.
Translation: Deutsche Bundesbank
Mr Weidmann, knowing what we do now, if we had to decide today on whether or not to introduce the euro – would you be in favour of it?
Back in 1963, Karl Blessing, one of my predecessors, pointed out that monetary union should be embedded in a political union. When monetary union was introduced at the beginning of the 1990s, the Bundesbank cautioned that, at the very least, a set of clear rules to be observed by all members was necessary.
So you would advise against it?
This is no longer an issue. Now it is a question of improving the framework of rules and the will to comply with agreements.
The crisis has been going on for nearly five years now. Crisis fatigue is beginning to spread.
That is precisely what can become a threat. Namely, when policymakers want no part of the crisis any longer and expect the central bank to come and put out the fire.
Have we at least seen the worst of the crisis?
The crisis seems to have calmed down somewhat. Reforms are making progress. However, the root causes are far from being entirely eradicated.