ECB’s Weidmann tells governments to spend now but save later

Bloomberg reports that Bundesbank President Jens Weidmann praised euro-area governments for providing "significant, impressive" spending in the fight against the coronavirus, but warned that they'll need to tighten their budgets once the emergency has passed.

The German central banker told Bloomberg in an interview by email that the economy will need broad support for some time. He also argued that "the pandemic plainly shows how important a solid fiscal policy is."

"An extremely expansionary fiscal stance cannot be sustained permanently," he said. "Going forward, then, all countries will have to focus on reducing the very high debt ratios and ensuring acceptance in the capital markets, and to do this in a way that is compatible with our fiscal rules."

The comments strike at the heart of the debate over how Europe should handle the aftermath of the coronavirus, with governments across the 19-nation bloc pledging hundreds of billions of euros to support small businesses and compensate for lost wages.

"It is not yet possible to say for sure whether the measures taken to date will be enough," said Weidmannl. "Monetary policy is making a major and important contribution within the scope of its mandate, and will continue to play its role."