Bundesbank Doubles Their Reserves, Warns Eurozone Crisis “Is Not Over”
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In what can be interpreted as a damning verdict against recent regional crisis efforts, Germany’s central bank on Tuesday said that it had set aside nearly double its risk provisions from 2012, warning that the eurozone crisis “is not over despite the interim calm on financial markets.”
In what can be interpreted as a damning verdict against recent regional crisis efforts, Germany’s central bank on Tuesday said that it had set aside nearly double its risk provisions from 2012, warning that the eurozone crisis “is not over despite the interim calm on financial markets.”
Presenting Bundesbank 2012 results, Jens Weidmann, the bank’s president, criticized numerous governments – namely France, Italy and Cyprus – for failing to tackle the root causes of their troubles; and told other eurozone nations to implement early reforms rather than looking to the ECB for help.
“The crisis that we are facing is a crisis of confidence, and this confidence cannot be gained if we postpone the tackling of the root causes of the crisis,” he said, as cited by Reuters.
[quote]”The reform course in France seems to have floundered, in Italy it has been brought into question by the elections and in Cyprus (which is struggling to get a bailout) the situation is especially unclear…only governments, and not the central bank system” can solve the crisis, he added, according to the Associated Press.[/quote]Related:
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Though “the German economy remains structurally in good shape and should firm up over the course of the year,” Weidmann admitted that this was dependent on the absence of any new shocks from elsewhere in the euro zone.
[quote]“The crisis is not yet over despite the interim calm on financial markets,” he said, as cited by the New York Times. “New risks are continually being acquired and distributed among member nations. This has left a clear mark on the Bundesbank’s balance sheet.”[/quote]On Tuesday, Weidmann announced that the bank’s risk provisions, or the money it sets aside to cover losses like a default on euro zone bond holdings, were raised to 14.4 billion euros ($18.7 billion) from 7.7 billion euros a year ago. The bank still made 664 million euros in profits last year, which by law is transferred to the federal government for the purpose of paying down the national debt.
In a thinly veiled remark directed at recent ECB action, Weidmann also repeated his warning that monetary could not equalize financing conditions for small and medium-size firms across individual member states – one of the top policy priorities for ECB President Mario Draghi.
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“It is fiscal policy, not monetary policy that will decide the overcoming of the crisis,” said Weidmann, according to the Wall Street Journal.
[quote]“Mixing monetary and fiscal policy responsibilities can lead not only to financial risks in our balance sheets but financial risks spread between different countries’ taxpayers, even though the democratic responsibility for this lies solely with governments, not with central banks,“ he added, as cited by the Financial Times.[/quote]
