Bundesbank boss tells Hollande to leave EU fiscal pact alone

Bundesbank president Jens Weidmann warned French president-elect Francois Hollande on Saturday against tampering with the European Central Bank or the EU fiscal pact.

Speaking in an interview with the daily Sueddeutsche Zeitung, he also reminded Greece it would have to respect its commitments or risk having its bailout aid suspended.

"Any modification in the statutes (of the European Central Bank) would be dangerous," Weidman said when asked about Hollande's proposal during his electoral campaign to allow the ECB to take measures to support the economy or lend directly to states.

"Jobs and economic growth are the result of trade. The central bank is best placed to contribute to the stability of the (European) currency," he said.

With regard to Hollande's campaign pledge to renegotiate the European fiscal pact, he said "it is clear that must be refused."

"There is a European custom that you keep to accords you have signed," he said.

The conservative Weidmann's comments come ahead of Hollande's visit to Berlin on Tuesday, just hours after he is sworn in, for talks with Chancellor Angela Merkel.

Hollande said in his campaign that he would advocate measures to kickstart Europe's sluggish economies.

Weidmann said: "I know the new buzzword is 'growth'... all experience has shown that too much debt is a handicap to growth. To combat debt with more debt just will not work."

French Socialist politician Pierre Moscovici said he was confident Paris and Berlin could reach a compromise on how best to tackle the euro crisis.

"The Franco-German friendship, we are sure, transcends political differences," Moscovici told television channel BFMTV.

"It's important (Hollande and Merkel) meet, speak frankly and exchange ideas, then we can move forward."

On inflation, Weidmann stood firm: "It is a dangerous path, we must not repeat the errors of the 1970s. Inflation is socially unfair and will not get us out of the crisis."

It was the second day in a row Weidmann had quashed any idea, recently backed by Finance Minister Wolfgang Schaeuble, that Germany could live with a little more inflation in return for more domestic demand.

"If, on the advice of the ECB, we keep watch to make sure that average inflation doesn't rise above two percent, then inflation will not cross that threshold in Germany," Weidmann told Friday's Sueddeutsche Zeitung.

"Our citizens can have confidence in the vigilance of the Bundesbank," he added.

With regard to Greece, he said Saturday there was "no German economic diktat. But if Athens doesn't keep its word, it will be a democratic choice. The consequence will be that the basis for fresh aid will disappear."

And he shrugged his shoulders at the prospect of Greece reverting to the drachma, saying, "The consequences would be much worse (for Athens) than for the rest of the eurozone."

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