Thursday

22nd Oct 2020

Bundesbank chief: Eurozone crisis could last 10 years

  • Weidmann - 10 years needed to overcome the crisis (Photo: Chatham House)

Germany's central bank chief Jens Weidmann has said the eurozone crisis may take ten years to overcome, just as top euro officials claimed their response to the crisis is working.

"Overcoming the crisis and the crisis effects will remain a challenge over the next decade," Weidmann told Wall Street Journal in an interview published on Wednesday (17 April).

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

A member of the European Central Bank, Weidmann did not exclude a further interest rate cut "in response to new information."

The ECB key interest rate was lowered to a record 0.75 percent last year and has been kept at that level ever since. But while banks can borrow money from the ECB at such low interest rates, they have not lowered their own rates when lending to businesses or people.

"Everyone is asking what more can the central bank do instead of asking what other policy makers can contribute," Weidmann noted.

He urged European governments to continue reforms and warned that "the calm that we are currently seeing might be treacherous."

As for the Cyprus bailout, Weidmann said it was a good decision to include losses for depositors above €100,000.

"The Cypriot case shows that it's possible to wind down banks. This is in principle a good thing, because it means that taxpayers don't always have to step in to bail out banks," he said.

Meanwhile, other central bankers gathering in Washington for the International Monetary Fund's spring meeting also pointed to the limitations they have in helping economies overcome the crisis.

Mervyn King, the outgoing governor of the Bank of England, said that “there is the risk of appearing to promise too much or allowing too much to be expected of us," the Financial Times reports.

Top eurozone officials say that "Europe is responding" to the crisis and emerging stronger from it.

In a joint op-ed for the New York Times, Eurogroup chief Jeroen Dijsselbloem, economics commissioner Olli Rehn, ECB member Joerg Asmussen and the heads of the eurozone bailout fund and the European Investment bank, Klaus Regling and Werner Hoyer, admitted that the crisis revealed "structural problems" in the set-up of the economic and monetary union.

"But in the eye of the storm, we strengthened the foundations of our currency and improved the sustainability of our economies," they wrote.

The IMF takes a less optimistic view. On Tuesday it warned that the eurozone's economic recovery is falling behind that of the US and that swifter action by governments is needed to implement the so-called banking union.

But elections in Germany in September and the reluctance of other states to cede more powers to Brussels is stalling the process.

IMF warns Europe of falling behind US on recovery

Europe is falling behind the US in emerging from the economic crisis, with sluggish growth in Germany and recession in France worsening the outlook for eurozone periphery countries, the IMF has said.

Germany asks capitals to give a little in EU budget impasse

European Parliament negotiators are demanding €39bn in new funding for EU programmes such as Horizon research and Erasmus, in talks with the German EU presidency on the budget. Meanwhile, rule-of-law enforcement negotiations have only just begun.

News in Brief

  1. Commission to press Croatia on migrant 'abuse' at border
  2. Belarus opposition awarded 2020 Sakharov Prize
  3. Belgium's foreign minister in intensive care for Covid-19
  4. MEPs restrict CAP funding for bullfighting
  5. Coronavirus: Liège is 'the Lombardy of the second wave'
  6. UK to keep out EU nationals with criminal past
  7. Report: EU to restrict travel from Canada, Tunisia, Georgia
  8. Pope Francis supports same-sex civil unions

EU countries stuck on rule of law-budget link

Divisions among EU governments remain between those who want to suspend EU funds if rule of law is not respected, and those who want to narrow down conditionality.

Stakeholders' Highlights

  1. UNESDAMaking healthier diets the easy choice
  2. Nordic Council of MinistersUN Secretary General to meet with Nordic Council on COVID-19
  3. UNESDAWell-designed Deposit Return Schemes can help reach Single-Use Plastics Directive targets
  4. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  5. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  6. UNESDAReducing packaging waste – a huge opportunity for circularity

Latest News

  1. Nato and EU silent on Turkey, despite Armenia's appeal
  2. EU tells UK to decide on Brexit as deal 'within reach'
  3. EU farming deal attacked by Green groups
  4. France vows tough retaliation for teacher's murder
  5. All eyes on EU court for decision on religious slaughter
  6. 'Big majority' of citizens want EU funds linked to rule of law
  7. EU declares war on Malta and Cyprus passport sales
  8. EU Commission's Libya stance undercut by internal report

Join EUobserver

Support quality EU news

Join us