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For ten years it has been a thorn in the side of the Mediterranean countries of the Eurozone. Those with a high public debt, so to speak. Whenever the president of the European Central Bank Mario Draghi announced monetary policy measures in support of the member states, he was there to defend the reasons of the North, of the countries beyond the Alps (seen from our home). The reasons for Austerity. Jens Weidmann, Präsident of the German central bank since May 2011, has announced his resignation. The longest-serving member of the ECB’s Governing Council has asked to be relieved of Federal Republic President Steinmeier by the end of the year. Officially, for personal reasons. A long parable, that of Weidmann. In 2019, he almost failed to succeed Draghi on the 35th floor of the Eurotower.
Hawks and doves. Stick and carrot. When it comes to central bankers, these are the metaphors most used by economic chroniclers. And Weidmann was a hawk, with no ifs and buts. Born in Solingen, Westphalia, 53 years ago, his propensity for the economy was not immediately clear. Indeed, young Jens, as a teenager, was certain that his future would be the natural sciences. He even participated in a competition for young scientists, Jugend Forscht, with an experiment on the pollution of rivers. A project he still boasts of today. But then, with the coming of age and the end of school, enlightenment came. He begins his long and fulminating cursus honorum in the academic world. An enfant prodige of the monetary economy. Studies in Marseille, Paris and Mannheim. A Doctorate in Bonn, in 1994, with a thesis on the European Monetary Union, under the guidance of his mentor Axel Weber, governor of the Bundesbank before him.
And then the first work experiences, in the 90s, in Paris, at the Banque de France, where he was able to thoroughly study the monetary union of the Françafrique, the CFA Franc. From Paris he flies to black Africa, to Rwanda, as an advisor to the central bank of Kigali. In 1997 – the young Weidmann is not even 30 years old yet – the big leap to the International Monetary Fund arrives. In 1999 he joined the German Council of Economic Experts, the infamous Fünf Wirtschaftsweisen, the ‘five wise men’ of the Teutonic economy. A small group of experts who advise the Chancellery and the Bundestag on economic matters. Hence, Weidmann will be the inspirer of the 20-point plan underlying Agenda 2010, the vast package of economic and social reforms approved by Gerard Schröder, Angela Merkel’s Social Democratic predecessor. Reforms that gave stability and long-term growth to the entire German production system.
Weidmann’s star continues to shine on Berlin. Merkel calls him a sherpa for the G20s and G8s of his early years at the chancellors. In the midst of the financial crisis, Weidmann will play an influential role in decisions such as the bail-in of Hypo Real Estate, a Bavarian real estate holding made up of three banks, which suffered from the European debt crisis. Nationalization of the group in 2009, strongly desired by Weidmann, averted a Teutonic Lehman Brothers, saving the savings of thousands of German account holders. And avoiding a new contagion of bank debt ready to expand in half of Europe.
In February 2011, the consecration. Chancellor Merkel appoints Weidmann – only 43 years old, the youngest in history – to head the Deutsche Bundesbank. There is no central bank in the Eurozone with a reputation as a ‘hawk’ greater than the BuBa. And Weidmann’s profile seems to be perfect for this very heavy armchair. The tuft of hair never out of place, worn strictly to the left, the perfectly rectangular glasses, the French-necked shirts. With a little whim, though: a penchant for ‘seven folds’ ties of Neapolitan manufacture. Weidmann falls physically and professionally into the category of Austerity Hawk. That group of politicians and bankers, coming from European countries strictly located north of the Alps, who have always been known for their firm opposition to the economic requests to revise the European economic and monetary policy. Always at loggerheads with the ‘Mediterraneans’. Recently returned to the fore under the guise of Frugali, opposed to the common European debt. In short: the black beasts of the undisciplined Pigs. Portugal, Ireland, Greece and Spain. Sometimes even Piigs, with Italy.
A few months after his appointment, the risk of the top European banking jobs is completed. Bank of Italy Governor Mario Draghi succeeds Jean-Claude Trichet in Frankfurt, at the helm of the European Central Bank. And there, on the banks of the Main, the Eight Years’ War between Weidmann and Draghi will take place. The scarce 4 kilometers that, in the German financial capital, separate the Eurotower from the BundesBank building, have never been such an insurmountable distance. On the one hand, Hayek’s austerity. On the other hand, Keynes’ flexibility. Weidmann vs Draghi. Hawks against Doves.
The first real fight starts with the whatever it takes announced by the Italian in his London manifesto-conference on July 26, 2012. For Weidmann, the ECB cannot do “whatever is necessary” to save the Euro from the speculation of the time. Four years after the subprime crisis, the most indebted countries of the Eurozone were once again in danger of default. Greece in particular. With Draghi’s arrival in Frankfurt, there would no longer be strict conditions for Eurozone member states to access their government bond purchase programs.
Draghi’s ECB would soon start buying the government bonds of the countries most in difficulty. In essence, guaranteeing the sustainability of their public debts. A revolution in European monetary policy, which has always been oriented towards a more sober one let it go. Weidmann was the first to say no. To vote against, in the board of directors, the new Draghi line. And it will be a long war of attrition. Three years later, when Draghi will announce the bazooka, namely the 1,100 billion euro Quantitative Easing, decisive for putting an end to the European debt crisis, Weidmann, in the very first row, will still be voting against. What matters, for the head of the BuBa, is to keep inflation under control and the financial risks associated with keeping interest rates close to zero for too long.
But there was a time when Weidmann briefly began mitigate its positions. In the first months of 2019 we start talking about the succession to Draghi. Weidmann, among the veterans of the Eurotower board of directors (where the governors of the 19 central banks that have adopted the Euro sit), is among the eligible candidates. In Frankfurt, many were convinced that the institution should be headed by “a German, a representative of the main economy of the Eurozone and of the school of economic thought that had defined the identity of the ECB” as explained by Alessandro Speciale and Jana Randow in the they biography of Draghi. But the operation did not go through. Despite Weidmann’s accommodating statements, the Mediterranean countries, Italy in the lead, never gave a green light to the rise of the German hawk at the helm of the Eurotower. He was preferred the French Christine Lagarde, a perfect compromise between the different sensitivities of monetary policy between Northern and Southern Europe.
Today, the announcement of his resignation. Unexpected. It is not known what 53-year-old Jens has in mind for his future, who nevertheless remains president of the International Bank for Settlements. The only certainty is that his music hasn’t changed. In the letter of resignation as governor, Weidmann returned to play the charge, one last time, on the risk of inflation. “For the future – he wrote – it will be crucial not to look unilaterally at deflationary risks”. And again: the monetary policy of the ECB “respects its strict mandate and does not allow itself to be caught in the wake of fiscal policy or financial markets”. In short: hawk to the end.
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