the author is shocked !
Not so much about the latest 'statement of capitulation' of the Bundesbank, but about the lack of media attention it got so far !
Bundesbank rechnet mit überdurchschnittlicher Inflation in Deutschland
"Die Deutsche Bundesbank rechnet damit, dass Deutschland mit überdurchschnittlichen Inflationsraten zum Abbau der Leistungsbilanzungleichgewichte im Euroraum beitragen wird. Der Leiter der volkswirtschaftlichen Abteilung, Jens Ulbrich, sagte bei einer Anhörung im Finanzausschuss des Bundestags, "reguläre marktliche Anpassungsprozesse" würden dazu führen, dass sich die Wettbewerbsfähigkeit der Peripherieländer gegenüber Deutschland verbessern werde"
"German Bundesbank awaits that Germany with higher than average inflationrates will contribute to the depletion of current account deficits within the eurozone. The chief of the economic department , Jens Ulbrich¹, said during a hearing of the finance committee of the Bundestag, "regular market accommodation processes" would lead to an improvement of the competitiveness of peripheral countries contra Germany. "
"Deutschland dürfte in diesem Szenario künftig in der EWU eher überdurchschnittliche Inflationsraten aufweisen, wobei die Geldpolitik dafür zu sorgen hat, dass die Inflation im Aggregat der EWU dem Stabilitätsziel entspricht und die Inflationserwartungen fest verankert bleiben", fügte er hinzu."
"Germany would possibly show some above average inflation rates in the EMU in that scenario, where the monetary policy has to see that inflation in the aggregate of the EMU meets the stability goal and the inflation expectations will remain tightly anchored", he added.
(German language excerpts all from article of Märkische Allgemeine)Those words by German Bundesbank perfectly fit in the context described here earlier on this blog, where German finance minister Wolfgang Schäuble has crossed lines before and now thinks as Paul Krugman and others do and see this as the only viable solution to hold the currency union together, or better preventing massive current account deficits to blow up the whole construction. The author doesn't know for sure, but it might played a role that professor Sinn and others made it clear, that there was more risk to Germany, its finances and its economy as well as to whole European future, when this goes totally wrong.
That subject is so huge it is rather strange that so far no journalists jumped on the story and asked Mr Schäuble and all others most certainly involved in the decision making process what exact 'game plan' they have in mind and what exactly made them rethink their previous heavily defended position.
It might have also played a role that it was forecasted that Mr Sarkozy would no longer be in office shortly and that Chancellor Merkel faces the choice of cooperating with the other major European power or get isolated and possible exit the Euro instead of Greeks as it was suggested not that long ago by Mr Panicos Demetriades.
So Germany is facing now very very difficult choices, which might have been already made, but not fully comprehended by the German public by now. (And international financial press seems also to repeat the rather slow process of fully understanding the implications like back then in December when Mario Draghi was announcing his unprecedented steps (LTRO) later described as 'big Bertha' instead of the bazooka demanded before by those who couldn't detect neither a bazooka nor a 'big Bertha')
update/ related article(s):
May 13th Der Fluch der Inflation/The curse of inflation (FAZ)
May 9th Rolle der Geldpolitik: Jens Weidmann - Zentralbanken sind keine Krisenlöser
Apr 29th Bundesbank and German government about to fight real estate bubble
¹ A former close ally of former Bundesbank helm Axel Weber.