Thursday 19 January 2017

Bailouts anathema to banker who regards them as detrimental to eurozone future

Published 10/02/2011 | 05:00

OFFICIALS at the Department of Finance probably allowed themselves a brief smile yesterday following reports that Bundesbank president Axel Weber won't be seeking the top job at the European Central Bank.

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Weber is intellectually and temperamentally unable to understand countries such as Ireland. An ECB run by the abrasive central banker would have been less sympathetic than Jean-Claude Trichet to our seemingly endless appetite for ECB funds.

Weber's beliefs are rooted in what Germans call 'Ordnungspolitik'; the idea that there is a legal framework with a clear line between the sphere of the state and the activities of business. This is light years away from the more freewheeling Irish approach which can be summed up as "screw it, let's do it".

Weber's mindset had a deep influence on the single currency when it was introduced and it ensured that the ECB was modelled on the Bundesbank. There was also a clause that prohibited bailouts, introduced the Stability and Growth Pact, which aimed to ensure fiscal rectitude, and imposed rules preventing a 'transfer union', under which poorer states would take directly from richer ones.

When Weber spoke publicly against the ECB's first bond buyback plan last year, he was trying to protect his lifetime's work. By buying governments' bonds, the ECB was blurring the lines that define its role, which is principally to deliver price stability and to hell with the consequences.

Weber has been unapologetic for his policy views, describing himself in October as a "self-confessed conservative central banker" with no plans to change.

Here in Ireland, it is not always appreciated just how painful the bailout of Greece and Ireland is for the countries forced to prop us up. While many Irish politicians say that the money is only being lent to Ireland and will be paid back one day, few German voters believe they will ever see their money again and resent their currency's loss of face.

Chancellor Angela Merkel almost certainly lost regional elections in North Rhine Westphalia last year as voters punished her for rescuing Greece with German money. Now, the head of the Bundesbank has seen his ambitions thwarted for opposing the ECB's rescue of Greece and Ireland. Whether Germany's elite is prepared to take many more bullets for Ireland will be an intriguing sideshow to the unfolding drama surrounding the eurozone this year.

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