Bundesbank’s Future Role Sees Clash of German Coalition Parties
Germany’s probable next coalition is battling over the future role of the Bundesbank in Europe.
The Bundesbank routinely has been the champion of price stability in the euro area, pushing internal and publicly for the European Central Bank to avoid policies that could spark inflation or veer away from its mandate.
While the Free Democrats think the tradition should continue, the Social Democrats, who won September’s election, see that responsibility lie first and foremost with the ECB itself, a person familiar with the coalition talks told Bloomberg on condition of anonymity.
Depending on the outcome of the debate within the future coalition, the Bundesbank could head into a new area of alignment with the ECB, a welcome change after years of acrimony between the two institutions.
The disagreement over the Bundesbank’s role comes after Jens Weidmann’s surprise announcement that he’ll be departing as the institution’s president at the end of the year. That means the new government -- probably consisting of SPD, Greens and FDP -- will appoint his successor. Germany’s central bank chief automatically also gets a seat at on the ECB’s Governing Council.
The decision on the central bank nominee is expected to be negotiated as part of the wider package of cabinet posts, according to another person familiar with the coalition talks.
FDP chief Christian Lindner -- who wants to be the country’s next finance minister -- took to Twitter over the weekend to warn that the ECB could be caught up in the fiscal policy of high debt countries, which could undermine its means to fight inflation. He said Germany has a key role to play in ensuring stability in Europe.
Over the past four years, Finance Minister Olaf Scholz -- the SPD politician set to become Germany’s next chancellor -- already adopted a different, more supportive tone toward the ECB than his conservative predecessor Wolfgang Schaeuble, who had repeatedly criticized the institution’s expansionary policy.
Germany’s relationship with the ECB has often been hostile, characterized by Bundesbankers’ temper tantrums against ECB policies, featuring bitter resignations and disagreements fought out in court, capped by outcomes that often defied German wishes anyway. Under President Christine Lagarde, the rapport has become less confrontational recently.
The Bundesbank has a special place in Germany’s national consciousness as the former guardian of the Deutsche Mark, the postwar guarantor of price stability and a bulwark against a return to the chaos heralded by the hyperinflation of the 1920s Weimar Republic. Its president wears a symbolic mantle of responsibility in Germany with few parallels elsewhere.
The SPD, FDP and Greens seek to seal an agreement on building a government by the end of November.
©2021 Bloomberg L.P.