New German government picks Joachim Nagel as Bundesbank chief

Nagel replaces Jens Weidmann, who quit five years early after a decade of opposition to ECB policy

Germany's new government has picked Joachim Nagel, a career central banker with ties to the ruling Social Democratic party, as the next Bundesbank chief, finance minister Christian Lindner said on Monday.

Mr Nagel, a former Bundesbank board member, will take over on January 1st from Jens Weidmann, who quit five years early after a decade of fruitless opposition to the European Central Bank's aggressive stimulus policy of sub-zero interest rates and massive purchases of government bonds.

The 55-year old economist will take charge of the euro zone’s biggest national central bank at a tense moment. Inflation is more than twice the ECB’s 2 per cent target, and opposing camps within the ECB’s governing council have distinctly different views on its likely evolution.

“In view of inflation risks, the importance of a stability-oriented monetary policy is growing,” Mr Lindner said on Twitter. “Nagel is an experienced person, who ensures continuity at the Bundesbank.”

Mr Weidmann unsuccessfully opposed the ECB’s decision in his last meeting on Thursday to extend stimulus and warned that inflation could exceed the ECB’s benign projections.

A former board member of the state-owned development bank KfW Bank, Mr Nagel currently works for the Bank for International Settlements, which is often considered the central bank of central banks.

Early in his career, he was also a consultant for the SPD, the party that took over government earlier this month and will make the Bundesbank appointment one of its first decisions.

Tough stance

Although he has not publicly expressed views on monetary policy for years, speeches he gave as a Bundesbank board member show he adhered to the German central bank’s tough stance on inflation and emphasis on market discipline for banks and governments.

"Nagel can be trusted to continue the German Bundesbank tradition in the debates in the ECB," Friedrich Heinemann, an expert at the ZEW economic research institute, said. "He has extensive monetary policy and financial expertise, which is essential for today's complex monetary policy decisions."

Heading the Bundesbank, Mr Nagel would join Isabel Schnabel on the ECB's governing council as one of two Germans.

“Congratulations to Joachim #Nagel for being nominated as new President @bundesbank!” Ms Schnabel wrote on Twitter. “There are many important tasks ahead of us.”

Under fire

Germany has often been at odds with the ECB and the bank has repeatedly come under fire from government officials, the media and academics for policies they claimed helped weaker economies at the expense of ordinary Germans.

Their criticism, however, has often fallen on deaf ears at the ECB so Germans have responded by quitting, both from the Bundesbank and the ECB board, with nearly half a dozen top officials leaving in just over a decade after unsuccessfully opposing ultraeasy ECB policy.

"Nagel is a great and smart economist who will represent Germany well," Marcel Fratzscher, the head of economic research institute DIW Berlin, said. "Above all, his work on the role of financial markets and financial stability will continue to gain importance in the future." – Reuters

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