BERLIN (MNI) – ECB Governing Council member Jens Weidmann said that
central bankers must not tolerate higher inflation as a tool to counter
the debt crisis in the Eurozone.
“We central bankers must clearly reject calls for higher inflation
rates as a would-be solution for the crisis,” Weidmann told German
newswire DPA in an interview released Friday.
Weidmann, who is president of the German Bundesbank, said it was a
normal development that wages in Germany will rise given the current
healthy state of the economy and labor market. “Yet it must not cause
wages and prices to get out of control in Germany,” he warned.
The Governing Council member said there is currently no inflation
risk from the ECB’s long-term liquidity injections, given the weak state
of the Eurozone economy. However, it is essential to think in a timely
way about an exit from the extraordinary measures, he said.
The European Commission also said in its Spring Forecast report
released earlier on Friday that the liquidity injections appear to be
having a positive effect on financial markets and bank lending but that
the potential for adverse effects later on call for a timely exit.
The Commission warned that “there are concerns that the ECB’s
non-standard measures may contribute to reducing the incentive for banks
to strengthen their balance sheets, which might support credit flows in
the very short-term, but which is likely to imply constrained lending
further down the road.”
–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com
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