As many Europeans clamor for new government stimulus programs to boost their flagging economies, Jens Weidmann, the head of Germany’s Bundesbank, takes a different approach. The latest Bloomberg Businessweek profiles Weidmann.
Backers of “growth now” warn that austerity is plunging Europe into a depression in which fiscal stringency reduces growth, drying up tax revenue and forcing even deeper spending cuts, and so on in a downward spiral.
Weidmann, in the sober tradition of the Bundesbank, sees things differently. He believes that while deficit spending made sense as an emergency measure, it has gone on for too long, killing business confidence and investment while driving up debt and interest rates, thus making Europe’s long-term challenges ever graver. He rejects the argument that the European Central Bank is “the last man standing” in the euro zone and must therefore bend its rules to make money easier and credit more freely available. His prescription for growth is “structural reform”—exercise and diet for an out-of-shape patient, not more medicine. …
… Asked whom he admired when he began studying economics as a university student in France, Weidmann cites the late James Tobin, the arch-Keynesian from Yale University. “He was somebody I liked to read at the time,” Weidmann offers. But doesn’t Weidmann disagree with everything Tobin stood for? “You can especially learn from people if you don’t share their ideas,” he explains, charmingly.
One suspects Weidmann might agree with Roy Cordato’s assessment of Keynesian economics for Carolina Journal Radio/CarolinaJournal.tv in 2009.