October 24, 2014

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On the deteriorating relationship between Germany and the ECB

Our colleagues of Reuters have been on a roll this week in their ECB coverage, first with the revelation about corporate bond purchases, and then again yesterday, with a story how much the relations between the Germany and the ECB have deteriorated. They are on to something here. The spat between Mario Draghi and Jens Weidmann is at the core of the policy dispute in the eurozone. It is not just personal – though that too – it is about two fundamentally opposed analyses of the problems of the eurozone, and the appropriate responses.

In their story, Noah Barkin , Eva Taylor and Paul Taylor write about a visit by Benoit Coeure to Angela Merkel’s office in Berlin, asking for reassurance that the constant bashing against Draghi should stop, and failing to receive such an assurance. He was told Angela Merkel would refrain from questioning Draghi’s policy, but was told she had no control over the public debate at large. The article said Merkel felt betrayed by Draghi’s Jackson Hole speech as it questioned the agreed fiscal policy stance. The article cited six (!) sources confirming that the personal relationship between Draghi and Jens Weidmann has hit rock-bottom. Weidmann’s spokesman is quoted as saying that Draghi kept national central banks in the dark and did not give sufficient time for the governing council to reach a consensus. One of the sources said the relationship between the two men has totally broken down to the extent they avoid each other. The article quotes Jurgen Stark as saying: "There is a lack of team playing going on in the Governing Council… the governance is changing."

Our other stories

We also have stories on the spat between Renzi and Barroso; on the loss of Spain’s active labour population; on the division in the French Socialist party; on German dominance of EU institutions; on the Greek exit ambitions; on the rise of consumer confidence; on a proposal to fund an investment programme through the EIB; on the lender of last resort functions in the eurosystem.

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