Weidmann rebuffs IMF

Bundesbank President Jens Weidmann, left, and German Finance Minister Wolfgang Schaeuble

Following the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) in Washington DC, Jens Weidmann painted a fundamentally positive picture of the global economy. "Though one might describe global growth of 3% this year and 3.5% next year as being on the modest side, I don’t see any reason for overblown economic pessimism", he said on Saturday at a joint press conference with German Federal Finance Minister Wolfgang Schäuble. Particularly with regard to the euro area, he pointed out that the most recent staff projections of the European Central Bank (ECB) had also shown that the economic upswing was continuing and that, at the same time, a gradual rise in inflation could be observed. According to the ECB’s projections, by the end of 2018 inflation in the euro area will again be in territory that is largely in line with the ECB’s definition of price stability, which is an inflation rate of just under 2%. In September, inflation in the euro area stood at just 0.4%.

International spill-over effects of additional fiscal stimulus measures are small

As for Germany, Weidmann noted that the "underlying cyclical trend remained fairly robust". While a slight flattening of growth is expected for the second half of 2016, growth remained "solid" overall, he said. In its latest projection, the Bundesbank expects real economic growth of 1.7% this year, after 1.8% last year. Against this backdrop, and in light of the sound economic outlook, Weidmann emphasised that he currently also saw no reason "to make even greater efforts to stimulate demand". He rebuffed calls by the IMF for Germany to step up investment in order to give a boost to the domestic and global economy alike. "It would be absurd to assume that a more accommodative fiscal policy would relieve the perceived drag on the global economy", Weidmann explained, adding that the spill-over effects on other countries were too small to justify such a move.

Warning against protectionism

By contrast, Weidmann echoed the Fund's warnings about the consequences of the emerging tendencies to undo efforts to liberalise global trade. "I agree with the Fund's warnings against the spread of protectionism and assessment of the important contribution that cross-border trade and international division of labour make to our prosperity," he said.