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Weidmann Resignation? Better Not Hope for It!

There might be those who say with a smirk "About time!", when these latest rumors about a possible resignation of — dare I say — teutonically stubborn German central bank president Jens Weidmann flittered through the headlines.

Jens Weidmann, head of the Bundesbank, arrives at the German government cabinet meeting on June 27, 2012 in Berlin, Germany. Germany's upper house of parliament, the Bundestag, is scheduled to vote on Friday whether to ratify the European Stability Mechanism (ESM), the permanent bailout scheme for the euro zone, which many analysts see as crucial to reigning in the current Eurozone debt spiral.
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Jens Weidmann, head of the Bundesbank, arrives at the German government cabinet meeting on June 27, 2012 in Berlin, Germany. Germany's upper house of parliament, the Bundestag, is scheduled to vote on Friday whether to ratify the European Stability Mechanism (ESM), the permanent bailout scheme for the euro zone, which many analysts see as crucial to reigning in the current Eurozone debt spiral.

Let’s face it, other Bundesbankers have resigned over the same issues or less in these past years of debt crisis turbulence. So if the present incumbent, Weidmann, were to throw in the proverbial towel because he might feel he is no longer heard in the ECB council or increasingly isolated it would hardly be surprising. Or would it?

Many are quick enough to draw the paralell to his predecessor Axel Weber who indeed, on the surface of it, resigned over his opposition to bond purchases by the ECB. Weber (and indeed Jürgen Stark on the ECB executive board) felt very strongly that purchasing bonds of struggling euro zone countries in order to effectively prevent a blowup of yields for sovereign debt from those regions was a stark abandonment of the ECB mandate and a form of monetizing debt that was simply illegal. The ECB proceeded down that path all the same. Hence his resignation.

But — it wasn´t really THAT simple. Weber resigned much less over the bond program (although that was the official version of his move); he resigned far more over what he judged to be a withdrawal of support from Chancellor Angela Merkel for his candidacy as ECB president.

And here is the real difference between the position of Weber and Weidmann. Cast back your minds to the time of Weber´s resignation. Weber had been (sorry, but there´s no other way to say this!) behaving like the proverbial 5-ton-gorilla in and around public appearances, contradicting the ECB president Jean-Claude Trichet at every possible corner, and that was a clear break with unwritten ECB rules. On days of council meetings and press conferences, Weber demonstratively gave interviews on German prime-time TV barely an hour after the official "porte parole" (spokesman) of the ECB, Trichet, had explained monetary policy to the world.

At some stage Angela Merkel might or might not have been doubtful whether Weber was indeed the right man to head the ECB, fearing that his, shall we say, often undiplomatic way of pushing his and the Bundesbank´s position might have done more harm than good. In any case, Weber felt abandoned and well, pouted. The result is well known: He resigned over the bond purchasing program. Enter stage: Jens Weidmann, once one of Weber´s students and protegees and freshly arriving from Merkel´s side where he had served as her economic advisor.

Now, on the surface of it, Weidmann has plenty of reasons to resign. The Bundesbank (or Buba as it’s known) and he are more isolated in their fundamentalist anti-bond-buying stance than ever. He is clearly at loggerheads with his president Mario Draghi. So much so that, in an unprecedented statement, Draghi effectively pointed the finger at Weidmann at the last press conference for voting against the rest of the council. That was indeed bad style by Draghi and utterly unheard of. The reasoning for the ECB for not publishing minutes and voting results of council meetings has always been that the individual members of the council should be protected from pressure and criticism, much needed to guarantee independent thinking and voting. Draghi clearly kicked that principle in the teeth last month, and Weidmann would have reason enough to be upset by this.

But would he resign over it? — Official comment from the Buba, as expected: no comment.

What would be gained by a resignation? For Weidmann and the Bundesbank, nothing. The Bundesbank position would not change with his successor (as we have seen when Weidmann took over from Weber). What about the ECB and Draghi? If anything, a Bundesbank resignation is the very LAST thing Draghi needs right now. Just the kind of vote of no confidence from Germany (or the Buba) that he could do without. Good luck with convincing the next Bundesbank president about the need for bond purchases!

There is another element to this story: Weidmann´s personality. For lack of a better explanation: He is not a quitter. Unlike Weber, he has does not have a larger than life ego (sorry, Axel!). He has a very unconfrontational, but nevertheless tenacious way of putting his points across and then not budging from his principles. He has the unwavering support of his former boss, Angela Merkel. She voices it regularly. And we also have Weidmann´s own words from admittedly a while ago. When asked about possible resignation over such matters as bond purchasing programs, he clearly said something along the lines of: Don´t put your hopes up ... I´m going to stick around. I can best defend the Bundesbank´s position and the stability of the euro by staying on.

Quite. And — nobody can fire him. If he does stick around, Draghi will have to deal with him almost until the end of his own tenure. Good luck!

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