BERLIN (Reuters) – Bundesbank President Jens Weidmann warned euro zone governments forced to increase public debt to support their economies during the coronavirus pandemic not to expect the European Central Bank to keep interest rates low forever.
“We will not take into consideration sovereign debt servicing costs if price stability mandates higher interest rates,” Weidmann, a member of the ECB’s Governing Council, told the Rheinische Post newspaper in remarks published on Thursday.
“In their own interest, governments should prepare for a rise in interest rates and not pretend that their debt burden can be serviced easily,” said Weidmann.
Reeling under the weight of a coronavirus-induced recession, European Union nations agreed earlier this year on an unprecedented 750 billion euro recovery package, funded by a joint debt issuance, a once-taboo subject long criticised by Germany. Member states have also taken on separate new debt to support their economies during the crisis.
The European Central Bank approved a fresh stimulus package this month, saying 2021 would remain difficult. It predicted that vaccinations could lead to sufficient levels of herd immunity by the end of the year.
(Reporting by Joseph Nasr; Editing by Chizu Nomiyama)
