Bundesbank President Jens Weidmann has expressed unease about the EU’s extensive joint borrowing to fund the Recovery and Resilience Facility in response to the coronavirus crisis. “This kind of borrowing should remain a one-off crisis measure,” he said, arguing that permanently raising joint debt does not square with the EU’s institutional framework.

In the first half of the year, the coronavirus pandemic led to the most severe economic crisis in decades. The German financial system has, however, proven to be stable during the pandemic, and so far fulfilled its key functions, said Claudia Buch, Vice-President of the Deutsche Bundesbank, at the presentation of the 2020 Financial Stability Review. Ms Buch added that, in the further course of the pandemic, corporate insolvencies are likely to increase, and this requires sufficient preparation.

Bundesbank President Jens Weidmann sees no reason to move away from the last monetary policy assessment at the moment and cautions against pre-empting decisions that are not yet on the agenda. “The monetary policy stance is appropriate at this time,” he told interviewers from the German “Börsen-Zeitung” newspaper.

According to Bundesbank Executive Board member Joachim Wuermeling, it is still too early to breathe a sigh of relief concerning the banking sector. “Economic activity is recovering, but the economic crisis only has a delayed effect on banks,” he said at an event in Berlin. Up to now, bank balance sheets had tended to be affected only in isolated cases by the coronavirus crisis. However, insolvencies can trigger credit defaults at short notice.