Several years ago I had dinner with Jens Weidmann. He just had given up his job as the head of the Monetary Policy and Analysis Group at Bundesbank and had moved to Berlin where he had become one of Angela Merkel’s chief economic advisors.
We met at Brasserie Entrecote, a nice small French restaurant close to Checkpoint Charlie, and enjoyed a lovely evening. Around 10.30pm, when we where about to leave, Jens ringed the motor pool of the chancellery and asked for a car. He did not go home but wanted a lift straight back to his office where he was going to enjoy another night shift. His family (Jens is married and father to two kids) until today is living 360 miles further west of Berlin in Wiesbaden, so there was nobody waiting for him at home.
This man is about to become one of the most important actors within the Euro system. According to reports in German newspapers Jens Weidmann, 42 years old, will today be announced the successor of Axel Weber and be the next president of Bundesbank. In May he will swap his office in the funky chancellery in Berlin and move back to the bunker-like headquarter of the German central bank in the northern outskirts of Frankfurt.
So who is Jens Weidmann? I guess my above mentioned experience tells a lot about him.
Jens is a hard-working guy who pays attention to every arcane detail and in generally takes his work really seriously. This should be taken for granted for a central banker but given the awkward politically influenced selection process for central bankers in Germany unfortunately it isn’t. For example, Axel Webers predecessor Ernst Welteke, who had to step down because he accepted Dresdner Bank paying him a visit in the Berlin luxury hotel Adlon, wasn’t really known as workaholic.
Apart from most traditional German central bankers Jens is dedicated to modern economics. He knows how to read state-of-the-art research articles in adacemic journals. When I visited him in Frankfurt in his former Bundesbank job he had a white board in his office which was always full of mathematical equations and complicated graphs. He once told me that the first thing he reads in each new issue of “The Economist” is the “Economics Focus” on current economic research. Jens is no “Ordnungspolitiker” of the old German style who thinks that general principles are more important that solutions that really work. He is a pragmatic who looks at facts and data before he makes up his mind. “Jens is more interested in empirical evidence than in ideology”, a close colleague of his once told me. Nevertheless he is in favour of neo-classical economics and he strongly recommended supply side reforms, fiscal consolidation and a slow wage growth.
He made his PhD at the University of Bonn which in the 90s had by far the best economics department in Germany. His advisor was Manfred Neumann, who is one of the leading monetary theorists in Germany with publications in journals like “The Review of Economics and Statistics”, “The Journal of Monetary Economics” and the “European Economic Review”. The now retired Neumann is strongly in favour of a very conservative monetary policy.
How hawkish will he be?
Given his academic pedigree Jens for sure won’t be a dove when it comes to monetary policy. However, I don’t expect him to be as hawkish as his academic teacher is. I don’t think that compared to Axel Weber his monetary policy will be much less hawkish. However, Jens is open-minded, friendly and soft-spoken. This distinguishes him from Axel Weber who earned a reputation of being a choleric person sometimes and who had a hard time dealing with criticism. Jens is much more humble, has a sly sense of humour and does not take himself too importantly. In Berlin, Jens got used to real-politics and compromise. This might contribute to a slightly less orthodox and more pragmatic Bundesbank.
Probably (and hopefully, as far as my personal opinion is concerned) he will nudge Bundesbank towards being a more modern and open-minded institution but even if he does this will be a painfully slow process. He is nobody who will introduce rapid change. Unfortunately this will mean that compared to the Fed and the Bank of England the German central bank is going to stay a stronghold of a pretty conservative monetary policy. In my humble opinion German central bankers are overly neurotic with regards to inflation and highly sceptical with regards to unconventional monetary policy. However unconventional measures like purchasing Government bonds will be essential to stifle the Euro crisis. (The majority of my colleagues in Germany who are covering monetary policy, however, are seeing this differently. The conservative stance of the Bundesbank is very popular in the economic press as well as in academia.)
I got to know Jens when he was the secretary-general of the German council of economic advisors, the so-called “five wise men”. There, Jens earned a reputation for being very efficient, well-organized and able to assuage tensions between the members of the council who not always tended to agree on each issue in the first place. Jens was one of the driving forces behind the modernization of the council and helped to introduce modern, quantitative methods. He was the mastermind behind the 2002 annual report of the council (“Twenty proposals for employment and growth“) This report later partly became the blue print for the labour market reforms of former social democratic chancellor Gerhard Schröder.
In Berlin he earned a reputation of being very loyal to Angela Merkel. I lost touch with him because I wasn’t based in Berlin and wasn’t involved in covering daily politics. He silently worked in the background and tried to avoid the headlines and the TV cameras. “He is not one of those people in Berlin who talk a lot without having much to say”, Sueddeutsche Zeitung recently wrote. The national daily describes him as “frighteningly correct”.
Given that I think Jens is an excellent economist I was rather disappointed by the mediocre crisis management of the German government in the financial crisis. No matter if it was regarding the bail out for the banks or the fiscal stimulus packages for the real economy, the creation of a bad bank or the Euro rescue – generally Merkel did too little too late. I don’t know if Jens was pushing her or trying to slow her down but I generally would tend to believe that he encouraged the necessary measures and Merkel hesitated because most of the stuff was politically unpopular, especially within her own party. In the end the German government always backed down, probably thanks to Jens.
I don’t think that he will be Merkel’s stooge at Bundesbank as some members of Merkel’s coalition partner FDP and opposition parties tend to believe. Jens knows the obligations of a central banker and he is well aware why monetary policy should be independent. Of course he is a very loyal guy. But I’m sure his loyalty will not direct personally towards Angela Merkel but towards his duties as a responsible central banker and towards the institution he is going to serve. Hence the current debates in Germany that the appointment of a Merkel trustee as the next Bundesbank president endangers the independence of the institution are completely over the top. Weidmann won’t be a Merkel trustee in his new job anymore.
The German economics professor Bert Rürup, who was a member of the council of economic advisors when Jens was its secretary-general, used to jokingly introduce him as “the coming chief economist of the Bundesbank”. This example shows how dangerous it is to underestimate Jens .
Update: Many thanks to Jens Clausen, the current secretary-general of the Council of Economic advisors. He just mailed me the English version of their 2002 report “20 Proposals for Employment and Growth” and gave me the permission to upload it on my blog. The website of the council is currently being refurbished therefore their English section is temporarily not available.
Update II: Now it’s official! “Merkel picks aide for Bundesbank, opening up ECB race”
Update III: Ironically, the above mentioned Ernst Welteke, who had to leave Bundesbank after a corruption affair, is now criticizing the decision for Weidmann, “Die Welt” reports. “One of his weaknesses is that Weidmann has never been at the helm of such a huge institution before”, Welteke said. Well, Weidmann hopefully will never stay luxury hotels at the expense of private banks….