Euro woes not over, says crisis-wary Bundesbank

Tue Mar 12, 2013 11:03am EDT
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By Eva Kuehnen and Paul Carrel

FRANKFURT (Reuters) - A wary German central bank said on Tuesday it had set aside billions more euros against what it deems risky European Central Bank moves, and criticized France directly for "floundering" in its reform drives.

Presenting Bundesbank 2012 results, Jens Weidmann, the bank's chief, said the euro zone crisis, which has eased as a result of ECB funding promises, was not over. He urged governments to tackle the roots of their troubles with reforms.

Weidmann, a member of the ECB's Governing Council, opposed the bank's yet-to-be-used bond-buy plan agreed last September and believes euro zone governments must shape up their economies to exit the crisis rather than looking to the ECB for help.

"The crisis that we are facing is a crisis of confidence, and this confidence cannot be gained if we postpone the tackling of the root causes of the crisis," he told Reuters in a television interview.

Stressing that "the crisis is not over despite the recent calm on financial markets," Weidmann earlier told a news conference there was uncertainty about the reform course in France, Italy and Cyprus.

"The reform course in France seems to have floundered, in Italy it has been brought into question by the elections and in Cyprus (which is struggling to get a bailout) the situation is especially unclear."

The ECB's other German policymaker, Joerg Asmussen, late last month urged France to take "concrete and measurable" steps to bring down its budget deficit, telling Reuters Paris faced a test of its credibility and must come as close as possible to its deficit goal this year.

Weidmann echoed Asmussen's call.   Continued...

Jens Weidmann, President of Germany's federal reserve bank Bundesbank addresses the media during the bank's annual news conference in Frankfurt, March 12, 2013. Inflation pressures are easing in the euro zone and price expectations are firmly anchored, European Central Bank policymaker Jens Weidmann said on Tuesday. REUTERS/Kai Pfaffenbach