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The EU’s coronavirus stimulus package needs more scrutiny, according to the head of Germany’s Bundesbank. President Jens Weidmann criticized the idea of joint EU debt as “fundamentally dubious.”
The president of Germany’s central bank Jens Weidmann has spoken out against elements of the EU’s coronavirus rescue package, calling for greater oversight of how the funds are used.
However, “I consider joint debt for wide-ranging transfers to be fundamentally dubious,” Weidmann told the reporters. However, the rescue package should “not be used as a springboard to large-scale EU debt becoming a regular form of budget financing,” he said in the latest interview. Instead, the central banker called for the use of a control instrument that would ensure funds “are used sensibly and efficiently.” Although, Weidmann has been heading the German central banksince 2011. Throughout the years, he has opposed the push for the joint borrowing scheme that would allow poorer EU countries to take out cheap loans while the richer member states effectively guarantee that the money would be paid back. Solidarity ‘is the right thing to do’
However, EU leaders last week agreed on the historic €750-billion ($821-billion) rescue package, which allots €390 billion to countries as non-repayable grants, with the rest taking the form of loans. The EU Commission plans to take on an unprecedented amount of shared debt on financial markets in order to finance the package.
However, Weidmann said it remained important that the EU prove its ability to respond in a crisis.
“Solidarity in Europe — including financial solidarity — is the right thing to do in this situation,” the Bundesbank president said. However, he called on politicians to put limits on the aid.
“It is important that aid measures have a time limit,” he said in the interview. “Then they will expire automatically over the course of time, and public finances will stabilize again.” The same principle should apply to government holdings in companies, he said.
Although, “They may be necessary now, but the state should withdraw quickly after the crisis,” Weidmann said in the interview. “The state is not the better entrepreneur.” Audits for wage subsidy program
However, Politicians also need to “regularly review [Germany’s] reduced working hours program,” Weidmann said, referring to “Kurzarbeit,” a wage subsidy scheme that allows struggling companies to decrease employees’ working hours instead of firing them. “The reduced working hours program should not hold up structures that no longer have a future, for example, when business models are outdated,” Weidmann said. Editor: GQ