Nagel returns to Bundesbank as boss, likely to maintain home view

FILE PHOTO: Joachim Nagel attends the German Bundesbank's annual press conference in Frankfurt
FILE PHOTO: Joachim Nagel attends the German Bundesbank press conference in Frankfurt, March 12, 2015. REUTERS/Ralph Orlowski/File Photo

December 20, 2021

By Francesco Canepa

FRANKFURT (Reuters) – The incoming chairman of the Bundesbank, Joachim Nagel, is a member of the ruling Social Democrats and a former policymaker of the German central bank who has maintained a conservative stance. his prime when he had a seat on the board of directors.

He will take over on January 1 from Jens Weidmann, who left his job five years early after a decade of fruitless opposition to the European Central Bank’s aggressive stimulus policy of sub-zero interest rates. and large purchases of government bonds, according to press and a government source.

As Germany’s representative on the ECB’s Governing Council, Nagel will have a say in key decisions, starting with how the ECB should handle a period of exceptionally high inflation and uncertainty. definitely stemming from the coronavirus pandemic.

Nagel’s nomination is expected to be formalized this week.

The 55-year-old economist joined the Bundesbank in 1999, climbing the ranks to reach the board in just over a decade before moving on to state-owned lender KfW in 2016. .

Now with the Bank for International Settlements, Nagel has not publicly expressed any views on monetary policy for years.

But the speeches he gave as a member of the Bundesbank’s board between 2010 and 2016 showed that he adhered to the German central bank’s hardline stance on inflation and emphasized strong emphasis on market discipline for banks and governments.

In the spring of 2012, when traders unconvinced by the ECB’s timid purchase of bonds from the most indebted eurozone governments were betting on the collapse of the currency bloc, Nagel said. The ECB should continue to focus on inflation, not state finances.

“There should be no clear separation of duties between fiscal and monetary policy,” he said. “Monetary policy should return to focus as soon as possible, only on ensuring price stability in the euro area.”

The Bundesbank lost that game: the famous pledge by then-ECB President Mario Draghi to do “whatever it takes” to save the euro, just a few months later and the ECB kicked off its first program. among several major bond-buying plans.


In the decade since, the eurozone’s central bank has amassed trillions of euros in bonds, mostly government debt, issued by its 19 member states.

The original aim was to revive price growth in the euro area, while more recently the ECB has sought to ease the burden on governments saddled with unprecedented debt to finance the fight against COVID. -19.

Under Draghi as well as his successor Christine Lagarde, the ECB has also provided banks with increasingly cheap multi-year loans, recently even repaying them on the condition that they do not shrink their loan books. self.

All of these measures were opposed by Weidmann, and Nagel’s speeches suggest that he had similar reservations.

Speaking a few months after launching the ECB’s Asset Purchase Program in 2015, Nagel said the eurozone central bank’s currency system did all it could.

“With its crisis management measures, the European System has reached the limit of its mandate,” Nagel said in October of that year. “All market participants must be clear that they must not be long-term dependent on central bank financing.”

The Bundesbank has since reluctantly accepted the purchase of government bonds as one of the ECB’s tools.

Nagel’s appointment was one of the first to be made by Germany’s new government, which includes Chancellor Olaf Scholz’s new Social Democrats, the Greens and the Liberal FDP.

Their union, which marks a reorientation of German politics after 16 years in power by Angela Merkel’s conservatives, is expected to spend and invest more generously.

But even with Nagel, a Social Democrat, at the helm, the Bundesbank’s deep skepticism about providing the economy with a paycheck is unlikely to change.

In June 2014, he said that the economy needed to shed public support, arguing in a speech that: “Real economic recovery must have a sustainable foundation.

“Growth must rely more on private consumption,” said Nagel. “Only that can help the economy grow away from its current reliance on irregular monetary policy and government spending and investment.”

(Editing by Catherine Evans and Kevin Liffey) Nagel returns to Bundesbank as boss, likely to maintain home view

Bobby Allyn

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