Weidmann: 'Climate policy is not a task for central banks'

It is not the ECB's job to play an active role in climate policy. That's what Jens Weidmann of the Bundesbank said this week in reaction on Lagarde's previous statements. According to him, it is not the task of the central bank to formulate climate goals. It could be an obstacle to the implementation of monetary policy. He also believes that climate policy is more of a task for politicians, because they are democratically elected. As a result, they have the legitimacy to determine what measures to take.

Lagarde wrote last week in a letter to a Member of the European Parliament who wants to include climate policy in the central bank's monetary policy, provided that this is in line with current policy objectives. This statement came in for a lot of criticism for several reasons. Some critics believe that climate policy is not a task for the central bank at all, while others fear that the ECB's independence will be called into question.

Green bonds

Climate activists want the ECB to prioritise so-called 'green bonds' with its purchase programme. These are bonds issued for projects that are classified as sustainable, such as wind farms and solar farms. By buying more of these types of bonds, the ECB can influence the economy. A controversial plan, because history shows that central banks must above all be independent. If they deviate from this rule, it can undermine confidence in the currency.

This contribution was made from Geotrendlines