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Germany: The Bundesbank is moving to the left

Written by Robert Mühlbauer for Junge Freiheit.

The old Bundesbank is dead, there is only a shell left. Since the departure of the D-Mark and the introduction of the euro in 1998, the Bundesbank has had to surrender currency sovereignty to the European Central Bank. Breaking the power of the Bundesbank was a key goal, especially for France.

In the first years of the ECB, old-school Bundesbank men like Otmar Issing and Jürgen Stark shaped the Frankfurt ECB monetary authority. Stark resigned in 2011 when the euro bailout became more and more unrestrained using the printing press, as had recently been the case with Bundesbank boss Axel Weber. Issing expresses himself more and more disaffected today. He sees the EU “on a downward slope”.

In the Draghi years after the infamous "Whatever-it-takes" for the euro rescue (2012), Bundesbank boss Jens Weidmann was initially a serious admonisher, then increasingly a lonely shouter who opposed government bond purchases and thus monetary state financing braced - but always in vain.

An old style federal banker goes with Weidmann
Monetary government financing has now become the norm. The ECB has now bought government bonds worth four trillion euros, and its balance sheet has inflated to around seven trillion euros.

Inflation is now starting, in Germany the rate of price increases has already climbed over four percent. But the vast majority of euro central bankers still do not want to stop buying government bonds. The senior ECB official Isabel Schnabel recently said that her real concern was that inflation would be too low next year. The ECB's target is two percent.

It had become more and more calm around Weidmann, his almost ritual invocations that monetary and fiscal policy (state finances) should not be mixed up, sounded like the echo of a time long past. ECB boss Christine Lagarde no longer perceived it as a serious threat to her course.

ECB wants to enforce “climate monetary policy”
Who will be the next President of the Bundesbank after Weidmann - surprisingly for most - has thrown in the towel "for personal reasons"? The new federal government under the leadership of SPD Chancellor Olaf Scholz will choose an economist that suits it.

The first names are already mentioned. Marcel Fratzscher, the head of the left-leaning German Institute for Economic Research (DIW) in Berlin, who has been providing support for SPD ideas in an almost penetrating way for years, would be ideal for a red-green coaliton. Under Fratzscher, the DIW always keeps its sails in line with the spirit of the times, it also finances research on the frequency of depression among “LGBT *, queer and inter * people”.

Before Fratzscher came to DIW in 2013, he worked at the ECB as a department head. He has always supported Mario Draghi and then Lagarde's course of cheap money. The 50-year-old would be the perfect mouthpiece for a left-green economic and monetary policy.

Isabel Schnabel is mentioned as the second name. The former Bonn economics professor came to the ECB in 2019 through the Council of Economic Experts (“Wirtschaftweise”) and is one of six members of the Executive Board. Her appointment has been sold to the German public in such a way that it is important to maintain “German” influence in the ECB's executive board, but Schnabel has turned out to be a streamlined ECB member.

She has little to do with German regulatory policy in the old Bundesbank tradition, and there are no known scruples about the massive purchase of government bonds. Aside from the pure economic issues, Isabell Schnabel has set scent brands with feminist and green hints. It would not stand in the way of a major turnaround by the ECB towards a “climate monetary policy”.

Weidmann successors are pale candidates
Lagarde has been trying to enforce this for a long time, with the ECB directing its bond purchases specifically towards "green" sectors, thus encroaching even more deeply into economic policy and promoting the "green transformation" with the money press.

Weidmann warned against overloading monetary policy with even more secondary goals, and that monetary politicians who were not democratically elected were not legitimized for a “green” restructuring of the economy. But the zeitgeist has long been blowing in this direction.

Claudia Buch, a rather inconspicuous economist who trades as the Bundesbank vice-president, but rarely speaks out on monetary policy and prefers to dig into data analyzes relating to questions of financial stability, is also named as a possible successor to Weidmann. As Vice President of the Bundesbank, she remained pale. The 55-year-old would be a weak voice in the Governing Council, so it would be very convenient for the southerners.

A secret favorite of Olaf Scholz for the Bundesbank post is likely to be Jakob von Weizsäcker. The red-cheeked economist with SPD party membership, born in 1950, has served Scholz as "chief economist" in the Federal Ministry of Finance since 2019, before that he was a social democratic member of the European Parliament for five years.

The Francophile son of the environmentally active physicist and SPD politician Ernst Ulrich von Weizsäcker is regarded as an “ardent European” - for example, he once advocated the creation of a pan-European public broadcaster.

Little chance for German regulatory policy
In the new traffic light coalition, the SPD and the Greens will insist that the Bundesbank - the former D-Markt-Wacht-am-Main - be redesigned in their favor. This will be one of the most important first personnel decisions of the next coalition. The FDP is likely to be far too weak to nominate an ordoliberal candidate.

Whoever moves into the executive office in the concrete block on Frankfurt's Wilhelm-Epstein-Strasse is ultimately only of secondary importance. In the 25-member Governing Council, the “southerners” including France have long had a comfortable structural two-thirds majority, with Christine Lagarde at the helm.

Germany, possibly still supported by Austria, the Netherlands and, in the past, occasionally Finland, will not be able to stop the move into further printing money for the over-indebted states.

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