The German government must not waver in its fight to reduce the public deficit despite the grim economic outlook, central bank chief Jens Weidmann said in an interview to be published Monday.
"The goal is to achieve a structural budget balance rapidly," the Bundesbank president told Tagesspiegel, saying he was not convinced by government calls for a "pause" in efforts to restore the fiscal balance. He pointed to Germany's "special responsibility (as a) pillar of stability in the euro area," which has been rocked to the core by a deep debt crisis.
Germany's public deficit is forecast by the Bundesbank to have declined sharply to 1.3 percent of gross domestic product from 4.3 percent in 2010, and is projected to reach one percent this year and 0.7 percent in 2013. Weidmann was cautiously optimistic on the prospects for economic growth in the country, saying the current situation was "relatively favourable". Last month, the central bank said GDP growth was forecast at 3.0 percent in 2011, but would expand by only 0.6 percent in 2012 and 1.8 percent in 2013 "assuming there is no substantial intensification of the debt crisis".
Weidmann also rejected calls by some politicians for a relaxation of regulatory rules as a way of resolving the debt crisis and restoring market confidence, saying: "We must say clearly where our regulatory limits lie."
He compared some of these demands to those of alcoholics "that promise to be sober tomorrow, but ask for one final shot of Schnapps. "I do not see how you can fight a crisis of confidence by not respecting legal frameworks," he added.
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