Buba's Weidmann: It's necessary to set clear limits to ECB flexibility

FXStreet (Łódź) - Buba chief Jens Weidman insisted today in a speech in Karlsruhe that the European Central Bank's flexibility should be clearly limited in order to guarantee that it remains independent. He also added that central bank credibility is founded on its ability to maintain price stability.

"Especially in a complex construct like the European Monetary Union, the independent central bank needs fixed boundaries to its flexibility - such the prohibition of monetary financing - to avoid its independence being called into
question," the Buba head stressed. "Only then it is guaranteed that the goal of price stability will not become secondary to securing government solvency even in time of crises," Weidmann, who also heads the Bundesbank, added.

Furthermore, Weidman stressed that financial institutions should be able to fail without threatening the entire system in the euro area.