World Crisis Online

Axel Weber’s unexpected departure from the Bundesbank is an opportunity, however disruptive it may seem in the short term. It liberates Germany from any obligation to choose a German president of the European Central Bank over one able to make the ECB work in German interests. Fortunately, those interests are aligned with those of the rest of the eurozone: Germany needs a president able to lead in difficult times.

The manner of Mr Weber’s abrupt departure suggests a personality unable to cope with the pressures of this role. But the reason he gave was itself convincing. He pointed to hostile political reactions to his “clear positions” on some ECB decisions, notably his opposition to the purchase of government bonds. “These positions might not have always been helpful for my acceptance in some governments,” he explained. In short, Mr Weber recognised that he could not lead a complex international institution from its extreme wing.

Some Germans might view this as a catastrophe, since it suggests how far their views diverge from those of their partners. Such risks exist. But they must not be exaggerated. It is important to stress how well the ECB, in particular, and the eurozone, in general, has served German interests. The yield on 10-year bunds has averaged 4.1 per cent since the euro’s launch, against 7.2 per cent between 1977 and the end of 1998. Again, German consumer price inflation has averaged 1.5 per cent since 1999, against 2.8 per cent between 1949 and the end of 1998. The eurozone has also shielded Germany from the impact of devastating currency crises. While Germany may end up with some fiscal costs as a result of having to support partners in difficulties, these look unlikely to be anything very significant.

Mr Weber’s purist position on some ECB operations may attract support inside Germany. But those operations resulted from a failure to create adequate mechanisms for handling crises in the financial sector and in sovereign debt. These defects can – and should – be fixed, without threatening monetary stability or Germany’s fiscal position.

Since membership of the eurozone is no threat to German interests, its overriding aim must be to choose a president able to make it work as well as possible. That person must be able to lead strongly from the institution’s centre of gravity. Germany need not fear the results. The ECB has demonstrated its ability to give Germany the stability it desires. Germany can be confident that it will continue to do so in the years ahead.