"An ultra loose monetary policy is a therapy with risks and side effects. It cannot become a permanent therapy"
- Jens Weidmann, Bundesbank president
During the speech in Berlin German Bundesbank President Jens Weidmann sang the praises of ECB accommodative policy, saying most of the Eurozone members are still struggling with effects of the longest-ever financial crisis. While many German politics and economists criticised Mario Draghi's measures, Weidmann backed his ultra-loose monetary policy, but pointed out that keeping interest rates at record-low for too long can have negative implications for the Eurozone economy.
With regards to the weak inflationary pressure in the bloc, he said the risk of deflation is limited. Meanwhile, the Eurostat confirmed that CPI advanced only 0.8% in December, easing back from 0.9% a month earlier and moving closer to the level which forced central bank to cut rates in October. While the economy is picking up, risks of disinflation are increasing, and on Thursday the head of the IMF, Christine Lagarde, warned that the recovery will remain fragile unless the "ogre is fought decisively".
In December many experts warned that political disputes among EU members will become the main drag in 2014. Hence, Jens Weidmann claimed France has lost some of its competitiveness and should live up to its responsibilities as Europe's second largest economy.
© Dukascopy Bank SA