Thursday, May 19

Lagarde assures the Bundesbank that she takes inflation “very seriously”


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The change in the presidency of the German Bundesbank has offered us the opportunity to observe a rare bird, that opposition of opinions between Christine Lagarde and the German central bankers, that we all know that it exists but that it is not manifested, that in the meetings of the Council of the ECB it takes place behind closed doors and is later softened by a statement that softens the dissensions. In equilibrium between these two extremes is how the euro has been navigating in the stormy waters of the last two or three crises, sometimes leaving some and sometimes others more satisfied with the result. And which of them now manages to make its own nuance prevail depends on the final form that the euro ends up taking.

The ceremony was opened by the new German Finance Minister, the liberal Christian Lindner, who shamelessly stressed that “Chancellor Scholz and I are the ones who have appointed Joachim Nagel” as the new President of the Bundesbank. Lindner has been full of praise for the stability that this highly respected institution has brought to German history over the last 65 years and has recalled that price stability is an essential requirement for the social market economy, a veiled reproach to the ECB’s refusal to do so. react against inflation. The Finance Minister has made clear what he expects from Nagel: continuity and tradition, a tradition in his opinion “very current.”

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This was followed by Christine Lagarde, who admitted the merit of the Buba’s ‘tradition of stability’, but who deliberately added a bit of holistic thinking that is so fashionable. “We understand that rising prices are a concern for many people and we take that concern very seriously,” he said, “the entire Governing Council of the ECB is united in the pursuit of this objective.” ‘But another of the key strengths of the Eurosystem is the way it brings together different perspectives to form a consensus. Our rich quality of debate and diversity of points of view ensures that our decisions are sound, ”he downplayed the influence that the German criterion gives to the whole of the European monetary system. And he added, by way of a guru: “He who lives must be prepared for changes.”

He referred to the fact that the ECB has an inflation target of 2% which is “simple and symmetric”, and downplayed the “phase” of inflation above the target, recalling that “we have rules on how to react when inflation deviates of our goal in both directions. And we are clear about the tools in our monetary policy toolbox and how and when to use them. He acknowledged that “inflation could be higher if wages rise faster than expected” and anticipated that he expects “inflation to remain high in the short term, but to fall over the next year.”

By the time Jens Weidmann, who resigned in October by surprise and “for personal reasons” and was taking his final leave of office at this event, approached the speaker’s platform, the succession of speeches had already turned into a game of tennis and ball. I was returning to the side of the track of stability. He cited another former Bundesbank president, Helmut Schlesinger, who more than thirty years ago established that the criterion of stability should be the one that governs future steps towards European integration. He criticized that the ECB has not come out of crisis mode since the financial crisis, he recalled that inflation causes concern, insecurity and loss of purchasing power for citizens, especially the most disadvantaged. In his opinion, the greatest challenge facing the euro is to continue taking solid steps towards integration without all its members sharing the same “culture of stability”.

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And if at this point there was still any doubt about the position of the Bundesbank regarding inflation and the necessary framework of action that the ECB must design, thinking of course in the long term, the speech of the new president of the Bundesbank dispelled them with a stroke of the pen. . “Citizens want us to be the voice of stability and I guarantee from right here that it will be”said Joachim Nagel, adding the phrase in English in case Lagarde did not understand German enough: “to save stability for people in the euro zone”. “People have less money in their wallets,” he simplified the record inflation rates in the Eurozone. He warned against excesses of public indebtedness, pointing out that climate protection cannot be carried out “at the cost of the solvency of the States” and remarked that stability is not achieved solely on the basis of monetary policy, but also requires stability of banks, the financial system and payment systems, a lesson that the Bundesbank has well learned “because it was always known in times of change,” he replied to Lagarde.

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