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Germany passes reins of Bundesbank to Weidmann

Published 04/29/2011, 09:15 AM
Updated 04/29/2011, 09:20 AM

* Former Merkel advisor is youngest ever head of Bundesbank

* Tough German inflation-fighting stance not seen changing

* May be less likely to oppose ECB debt purchasing-economist

By Brian Rohan

BERLIN, April 29 (Reuters) - Germany presented the government's chief economic advisor, Jens Weidmann, a letter of appointment on Friday to succeed his former mentor Axel Weber at the head of the country's central bank, the Bundesbank.

In a short ceremony attended by both men at the presidential palace in Berlin, President Christian Wulff transferred the post to Weidmann, until now Chancellor Angela Merkel's top economic adviser, who will take up the new job in Frankfurt on Monday.

"We are counting on you to maintain the currency's stability," Wulff said, adding, "May you have much success." ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

- For a NEWSMAKER story on Weidmann, please double click on:

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Weidmann's proximity to Weber's school of thought has most economists believing Germany's tight stance on monetary policy is unlikely to change with the appointment, which also and perhaps more importantly puts him on the 23-member governing council of the European Central Bank.

"It would be surprising for a German Bundesbanker to express anything but hawkish sentiments -- it's required for the euro zone at the moment, said Guillaume Menuet from Bank of America Merrill Lynch.

Weidmann, who just recently turned 43 years old, has spent the last five years as Chancellor Angela Merkel's top economic adviser, wielding major influence over policy as Germany struggled to contain the financial crisis and its worst recession since World War Two.

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He is expected to bring youth, political savvy and a new low-key style to replace Weber, who at times alienated European politicians with public policy outbursts.

LESS HAWKISH?

Weber shocked Germany and its European partners in February by announcing plans to resign from the Bundesbank a year before his term was to end, and pulling out of the race to become president of the European Central Bank.

He had alienated other countries in Europe, notably France, by coming out publicly against the ECB's decision to buy the bonds of struggling euro zone members -- a move ECB President Jean-Claude Trichet agreed to reluctantly at the height of Greece's debt crisis last May.

Such vocal opposition is likely to moderate with Weber's departure, as Weidmann is known more for work behind the scenes.

There could also be a shift in Germany's stance, if pressure on the ECB resurfaces to shore up weak economies on Europe's periphery with extraordinary measures.

Weidmann's years with Merkel has put him closer to politicians than the academic Weber was, and many see a man with his background as more likely to support controversial intervention.

"If for example questions over a possible Greek restructuring lead to instability on financial markets, then calls for the further purchasing of sovereign debt by the ECB would not be far off," said Claudia Windt from Helaba.

"I think here Weidmann would be slightly less hawkish than Weber, and would vote for the purchasing," she added.

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Still, it is difficult to say how exactly he will decide when he trains his reputed sharp intellect and strong opinions on inflation-tracking data.

"I think he's a very good economist, but it's hard to classify him beforehand," said Dirk Schumacher from Goldman Sachs. (Additional reporting by Gernot Heller, Eric Kelsey; Editing by Ron Askew)

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