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By Luke Heighton
ZURICH(MNI) - Jens Weidmann's chances of succeeding Mario Draghi as ECB
President may depend on whether he can admit to his own past mistakes, according
to one of the former ECB Governing Council colleagues of the Bundesbank boss.
"Some people say this is a debate about whether the president can be a
German," ex-Central Bank of Ireland Deputy Governor Stefan Gerlach told MNI. "Of
course, the president can be a German. It would be undemocratic otherwise.
"Some people think that Weidmann is not the right sort of person for the
job, but I disagree. Weidmann is a good economist, he's a good public speaker -
which is important - and he's also experienced."
"Weidmann is probably more flexible than he appears, but he has failed to
communicate that. He should say something like 'Looking back over the last ten
years of ECB policy, I recognise that some of the concerns that I had at the
time have not been realised."
Weidmann surprised ECB-watchers earlier this month when he dropped his
opposition to secondary market bond purchases by the central bank. This stance
against so-called Outright Monetary Transactions had been considered a key
stumbling block to furthering his ambitions at the ECB. However he appeared to
stop short of voicing full support for its future use.
"Weidmann's problem is that he hasn't sold the ECB in Germany," Gerlach
said. "In fact, he testified against the ECB in the German constitutional court.
He has to say that the policies the ECB has adopted over the last ten years are
now the laws of the land, and that these too can be used again if the need
With the ECB edging towards conducting a comprehensive review of its
monetary policy strategy, an operation last performed in 2003, and Draghi on his
way out, Gerlach had words of advice for his successor.
"The thrust of the review should be to look at how the different tools
worked and come up with a ranking of their effectiveness, and then which tools
might be used again in the future. It should say in particular that OMT is also
part of the framework. Once you've reached an agreement that these tools can be
used again, then some of the concern of having Weidmann as president would go
"It's clear now that the idea that the short-term interest rate is the only
monetary policy tool was almost an historical aberration. We're back to the
muddier years before that; the central bank can have a large number of tools. In
that sense the world has become much more complicated."
Gerlach served under former Central Bank of Ireland governor Philip Lane
for "one very good day" before the Irishman's elevation to ECB Chief Economist
earlier this month.
Asked how Lane and his predecessor in Frankfurt compare, Gerlach replied:
"Peter Praet has been very persuasive, very good at talking to people and at
selling the ECB's policies. This is very important. His CV is formidable. But
Philip has stronger academic credentials as an economist."
Gerlach expressed concern over the changing composition of the ECB, with an
increasing number of central bank governors coming either from a fiscal policy
background, or having comparatively little monetary policy experience.
"This is something very worrisome, because they can't participate in the
discussion. This leads to bias towards doing too little too late. The advantage
of Draghi, I think future monetary historians will say, the reason he was good,
was that he had financial markets experience. He listened to what market
participants had to say.
"He got the sense from them in 2012 that if he didn't say something the
euro could cave-in, and he took decisive action. No civil servant would ever
have done that. Politicians and civil servants are not great at running monetary
policy in uncertain times."
--MNI Frankfurt Bureau; +49-69-720-146; email: firstname.lastname@example.org
--MNI London Bureau; +44 203 865 3829; email: email@example.com