Draghi’s Fiscal Plea to Germany Is Fair, Ex-Bundesbank Head Says
Draghi’s Fiscal Plea to Germany Is Fair, Ex-Bundesbank Head Says
(Bloomberg) --
Bundesbank President Jens Weidmann hasn’t yet declared himself in favor of a fiscal boost in Germany, but his predecessor now says it’s needed.
Axel Weber, the chairman of UBS Group AG, told Bloomberg Television that officials in Europe’s biggest economy need to loosen purse strings rather than maintain a positive budget balance. He echoed this month’s plea to governments by European Central Bank President Mario Draghi that “it’s high time for the fiscal policy to take charge.”
“This is not the environment where fiscal policy in Germany, if you assume the second half is like the first, should be at a big surplus, like a 3% surplus. Actually it’s where fiscal policy needs to react. So the call of central banks that I’ve heard time and again for fiscal policy and structural policies to take more of a responsible approach is absolutely still adequate, it’s still warranted.”
-- Axel Weber
While the Netherlands this month shifted its stance towards ending an era of debt reduction in favor of fiscal loosening, German officials have held firm. Economy Minister Peter Altmaier played down the prospect of stimulus in comments on Tuesday, while Weidmann told a newspaper in August that there’s no reason for a major economic package. Weber disagrees.
“In Germany for example, there should be some long term investment-oriented, infrastructure-oriented fiscal expenditure. The easiest thing to do is a tax reform, and if you don’t want to do an income tax reform, you do a corporate tax reform.”
Weber was the Bundesbank president from 2004 until 2011, when he withdrew his prospective candidacy to lead the ECB by resigning over purchases of bonds of indebted European countries during the region’s debt crisis. That decision made way for Draghi to get the ECB role instead, and for Weidmann to succeed him at the German central bank.
--With assistance from Paul Gordon and Matthew Miller.
To contact the reporter on this story: Craig Stirling in Frankfurt at cstirling1@bloomberg.net
To contact the editors responsible for this story: Simon Kennedy at skennedy4@bloomberg.net, David Goodman, Brian Swint
©2019 Bloomberg L.P.