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July 01, 2018

Germany's Weidmann says next ECB boss must be able to tighten money taps

Germany's Weidmann says next ECB boss must be able to tighten money taps
FILE PHOTO: German Bundesbank President Weidmann speaks at an Austrian National Bank event in Vienna

FRANKFURT (Reuters) - The next head of the European Central Bank must be someone who can tighten the money taps after years of crisis-fighting and stimulus, the head of the Bundesbank Jens Weidmann said in a radio interview on Sunday.

Weidmann, seen as a leading candidate to replace Mario Draghi in November 2019, has so far avoided throwing his hat into the ring for the job, which is decided on by euro zone finance ministers.

But, when asked on Sunday about the next ECB President, his comments were closely aligned with some of his own views, including his long-standing call for the bank to halt extraordinary stimulus measures and tighten monetary policy.

"The task now is to normalize monetary policy with a view to our goal of price stability," he told Germany's HR-1 public radio.

"The ECB President must, like before, be able to communicate this policy and... unite the Council behind himself or lead the Council meeting."

He added the ECB's latest decision to stop its 2.6 trillion euro ($3.04 trillion) bond-buying program at the end of this year paved the way for interest rates to rise "after a certain time".

The ECB has said its interest rates will stay at record low levels through the summer of next year and most investors took this to mean the deposit rate will be raised in September or October 2019 for the first time since 2011.

Weidmann built a reputation as Draghi's staunchest opponent on the ECB's Governing Council during the debt crisis of 2011-2012, when he opposed a scheme to help countries in distress by buying their bonds.

While that facility was never used, the ECB has bought huge amounts of government bonds since 2015 to boost inflation, a policy that Weidmann has stigmatized as risky and too close to outright government financing.

The former adviser to chancellor Angela Merkel has also ruffled some political feathers, engaging in public exchanges with former Italian prime minister Matteo Renzi by criticizing Rome’s performance in cutting its debt.

But he sounded more conciliatory on Sunday, praising the new Italian government's commitment to respecting European Union budget rules.

($1 = 0.8559 euros)

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