Economy

German central bank president challenges landmark EU stimulus

Jens Weidmann said €750bn fund needs controls so money is spent wisely

Photograph: iStock

Sun Jul 26 2020 - 15:59

Bundesbank president Jens Weidmann challenged the landmark stimulus package agreed by European Union leaders this week, emphasising the importance of controls for the funds that seek to pull the region's economies out of the worst recession in memory.

In an interview with German newspaper Funke Mediengruppe on Sunday, Mr Weidmann questioned aspects of the package, saying it shouldn’t serve as “a springboard for large-scale EU debt for regular household financing.”

While the creation of the €750 billion fund to address the fallout from the pandemic was the right thing to do, he said, it needs a control mechanism so that the money is spent wisely and efficiently.

"It is important that support measures are limited, so that they automatically expire in the course of time and the public finances stabilize again," said Mr Weidmann, who is a member of the ECB Governing Council.

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Earlier this weekend, European Council president Charles Michel defended the package in an interview with another German newspaper, Frankfurter Allgemeine Zeitung.

Speaking with Spanish El Independiente newspaper published on Sunday, ECB vice president Luis de Guindos said the agreement about the fund was important as it seeks to ensure that no country is left behind.

"So, in this respect, the recovery fund reduces the risk of a two-speed Europe, " he said. "Evidently the recovery will not be uniform, but the plan will reduce divergence between economies." – Bloomberg

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