MNI POLICY: Skeptic Weidmann Downplays ECB's Climate Ambitions

By Luke Heighton

     FRANKFURT (MNI) - Using monetary policy to mitigate the effects of climate

change risks "overloading" central banks and compromising their independence,

the head of the Bundesbank said Thursday.

     "Monetary stability should be the primary goal of monetary policy," Jens

Weidmann said. "That's what the European Treaties -- our mandate -- also provide

for."

     ECB president Christine Lagarde has warned of the "danger of doing nothing"

on climate change, and last week suggested the issue will play a major role in

the ECB's strategic monetary policy review.

     However, speaking in Freiburg, Weidmann said he was "skeptical when [the

ECB] is asked to put monetary policy at the service of active climate policy."

     "If you overwhelm the central banks with tasks and responsibilities, you

run the risk of overloading them," Weidmann added.

     To take too "broad" an interpretation of the ECB's monetary policy mandate

would, Wiedmann warned, "ultimately jeopardize independence, and quite rightly

in my view," while running the risk of bundling power in the hands of

technocrats.

     "Nevertheless," he said, "we can support and accompany the change to a more

sustainable financial system as part of our mandate."

     "As bank supervisors, we have to make sure that banks take appropriate

account of financial risks from climate change and the transition to a greener

economy in their risk management.

     "And if we demand greater awareness from financial market participants at

this point, we must also meet these requirements ourselves. Because financial

risks related to the climate could also affect our own securities portfolio."

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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