The UK’s decision to leave is already being felt in mainland Europe; the German economy has been hit by the result as well, the president of Germany’s central bank told EURACTIV’s partner WirtschaftsWoche.
Jens Weidmann, the president of Deutsche Bundesbank, said that he was very disappointed with the result of the 23 June referendum. “This decision is very unfortunate and is, in my view, a mistake,” Weidmann said at a speech made in Munich.
However, like most high-profile figures commenting on the result, he urged the decision to be respected and dealt with. The banking chief also said that the election showed that there appears to be less and less success in showing people the benefits of the European Union.
Overall, Weidmann assessed the Brexit situation in a similar vein to his European Central Bank counterpart, Mario Draghi, in that what was occurring in the UK is a “political crisis” which must be solved through political means too.
Weidmann also concurred with Draghi that the result of the vote is having a slight braking effect on the Eurozone, but downplayed how dramatic the situation actually is. The economist also saw no need for further measures on the part of the ECB.
“I don’t see any need for further easing of monetary policy in reaction to the Brexit vote in the Eurozone,” said Weidmann. “The economic burden of this ‘political uncertainty’ would not be ironed out by looser monetary policy,” he added.
Many observers think that not just the Bank of England, but also the ECB, could roll out such loose policies further. The ECB could also expand its bond-purchasing programme. The Frankfurt-based bank has so far not commented on such speculation. Last week, at a forum held in Portugal, Draghi expressed his “sadness” at the result of the vote.
His deputy, Vítor Constâncio, explained on Wednesday (29 June) that the measures taken by the ECB were responsible for Brexit not turning into a second “Lehman moment”. “Our policy is an important stabilising factor,” said Constâncio. Without the ECB and its monetary policy, the aftermath of the Brexit vote could have become very dangerous, said the Portuguese economist.
He added that things would have to be left to develop before taking further action, but also highlighted that the ECB still has instruments at its disposal. If further measures are discussed by the ECB’s Governing Council then Weidmann called for the authority to show a steady hand when deciding what to do next.
The UK is the robust German economy’s third largest export country. Within the eurozone, Brexit could put the brakes on growth slightly. The ECB has estimated that growth could be curtailed by about 0.1% and that it could be 0.5% over the next five years because of the UK’s vote to leave, according to Draghi.
This all depends on what kind of split the UK and EU arrange and what kind of trade barriers will exist following the end of the negotiations.