FRANKFURT (MNI) – The notion that the current crisis can be solved
by switching on the printing press must be definitively discarded,
European Central Bank Governing Council member Jens Weidmann said
Wednesday.

“You cannot buy lasting trust with money alone. One
idea should finally be pushed aside, namely the idea that needed money
can be obtained from the printing press,” said Weidmann, who is
president of Germany’s Bundesbank.

“This would only serve to endanger the most important basis of a
stable currency: the independence of a price stability oriented central
bank,” Weidmann said in a speech text prepared for
delivery at an event marking the 10th anniversary of the euro.

Instead, national authorities must push ahead with fiscal
adjustment and economic reform efforts at home, and together strive to
improve the Eurozone’s governance, he said.

“This is certainly an enormous challenge, but the example of
Ireland has shown that it is possible,” Weidmann said. “Sustainable
budgets and competitive economies are in the interest of all.”

Weidmann welcomed the progress Eurozone leaders have made in terms
of
governance reforms but stressed that their decisions must not
be watered down either in the details or in their implementation. “One
of the big mistakes of the past was not to stick to agreements,” he
said.

Weidmann also said that going forward, incentives for solid fiscal
policies must be maintained.

“It would be fatal to completely remove the disciplinary impact of
rising [market] interest rates. If credit for governments gets more
expensive, the
incentive to go further into debt drops. Good fiscal policies must be
rewarded by credit cost, bad ones punished,” Weidmann said.

Weidmann pointed to the ECB’s success in maintaining price
stability and assured that the new ECB president, Mario Draghi, will
continue this tradition.

“We have a sovereign debt crisis and not a euro crisis,” Weidmann
said. “I am personally convinced that the euro and Europe will
emerge stronger from this crisis should politics take the right steps,”
he said.

–Frankfurt newsroom +49 69 72 01 42; e-mail: jtreeck@marketnews.com

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