By David Barwick – FRANKFURT (EconoStream) – Notwithstanding the current need for monetary policy support, the European Central Bank shouldn’t forget about the need to exit, ECB Governing Council member Jens Weidmann said on Tuesday.

Interviewed as part of a virtual conference on “Covid-19 and the impact on banks in Germany”, Weidmann said that the unison and resolve with which the ECB had acted were important to him, according to a text made available by Germany’s Bundesbank, which he heads.

Compared to fiscal and other policies, he said, monetary policy can only be “second fiddle” in countering the crisis triggered by the pandemic. Still, monetary policy has an important role to play, he said, even if “one can indeed have differing views about individual measures”.

“For me it is important that the ECB Governing Council acted decisively and collectively,” he said. “However, one thing also has to be clear, and that is as true of monetary policy as it is of fiscal policy: the extraordinary support measures are, to be sure, necessary at the moment. But we also mustn’t lose sight of the exit and of long-term sustainability.”

Weidmann said he did not envision a downward spiral of the economy, even allowing for currently high uncertainty, in view of fiscal policy measures taken to mitigate the crisis, but also of the “necessary monetary policy support” being provided by the Eurosystem. The economy would thus recover durably after the passage of the pandemic, he predicted.

A V-shaped recovery is unlikely, he indicated, noting that economic activity might be hampered until medical science defeats Covid-19 and that Germany depends on exports.

Just the temporary shuttering of many service providers and the resulting decline in consumption would shave 1% off of 1Q economic output, he said. Preliminary German GDP for 1Q will be released on May 15.

It is clear, he said, that Germany is experiencing a “severe recession”.