Bundesbank President Jens Weidmann said monetary policy is making a “major and important contribution within the scope of its mandate” to counter the impact of the coronavirus pandemic. But it’s “not yet possible” to say whether the coronavirus measures taken to date will be “enough” he added.
“The decisive factors for economic developments will be the further course of the pandemic, the length of the lockdown and whether the measures taken successfully address liquidity and potential solvency problems facing firms and households,” he said.
Weidmann admitted “an expansionary monetary and fiscal policy will in any case remain necessary for some time.” But he also argued that “the pandemic plainly shows how important a solid fiscal policy is.” “An extremely expansionary fiscal stance cannot be sustained permanently,” he said. “Going forward, then, all countries will have to focus on reducing the very high debt ratios and ensuring acceptance in the capital markets, and to do this in a way that is compatible with our fiscal rules.”
