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ECB's Weidmann appears to drop opposition to OMT amid race to succeed Draghi

ECB's Weidmann appears to drop opposition to OMT amid race to succeed Draghi
FILE PHOTO: German Bundesbank President Jens Weidmann presents the annual 2018 report in Frankfurt, Germany, February 27, 2019. REUTERS/Kai Pfaffenbach -
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BERLIN (Reuters) – European Central Bank policymaker Jens Weidmann appeared to drop his opposition on Wednesday to an ECB programme of government bond purchases announced during the euro zone debt crisis, as he sought to improve his position in the race to succeed Mario Draghi as president of the central bank.

Weidmann, head of the German Bundesbank, was the sole opponent on the ECB’s Governing Council to the Outright Monetary Transactions (OMT) programme, which he saw as financing governments. In 2013, Weidmann testified against the ECB in a German court case over the OMT.

Weidmann, a guardian of German economic orthodoxy who has often opposed the ECB’s easy-money policy, is one of the candidates to replace Mario Draghi as ECB president in November. But he may face opposition from indebted countries in the bloc’s south, which favour lower interest rates.

In an interview with the German newspaper Die Zeit’s online edition, Weidmann appeared to accept the OMT, saying: “The European Court of Justice has examined OMT and determined it to be legal. Moreover, OMT is current policy.”

His position on the OMT had not been legally based, Weidmann said. “It was driven by the concern that monetary policy could get caught in the wake of fiscal policy,” he said.

“Of course, a central bank must act decisively in the worst-case scenario, but given its independence, there should be no doubt that it is acting within the framework of its mandate,” Weidmann said.

Draghi announced the OMT programme at the height of the euro zone debt crisis in 2012. It proved to be decisive in calming the crisis, although it has not been used so far.

(Reporting by Michelle Martin, editing by Larry King)

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