President of German central bank Jens Weidemann to resign five years early
The President of Germany’s central bank—Jens Weidmann—will step down today, concluding his ten-year tenure, five years early.
While Germany’s federal bank—Bundesbank—does not have the authority to determine fiscal or monetary policy, it does have significant influence on the European Central Bank (ECB) and its direction. During his tenure, Weidmann was an advocate for strict monetary policy that opposed looser ECB policies such as quantitative easing and lowering interest rates, but was ultimately overruled by other officials such as then ECB chief Mario Draghi.
Weidmann will now be replaced by Joachim Nagel, who is expected to continue his predecessor’s push for stricter fiscal and monetary policy. Nevertheless, Nagel is likely to face the same opposition as his predecessor.
In the short-term, the ECB is unlikely to reduce use of quantitative easing and low interest rates. This will help the EU to recover from the COVID-19 pandemic and boost economic growth. In the medium- to long-term, this will lead to higher inflation rates on top of the already high 2021 Eurozone rate of 4.9%, which may lend precedence to stricter policies in line with German preferences.
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