By David Barwick – FRANKFURT (EconoStream) – European Central Bank Governing Council member Jens Weidmann said on Wednesday that the risks of sovereign debt purchases for monetary policy purposes are high and that measures taken by the ECB to mitigate the crisis must be removed once the crisis is over.

In a speech delivered virtually for the Übersee-Club Hamburg, Weidmann warned of possible pressure on central banks to keep borrowing costs low for longer to the benefit of indebted governments, according to a text provided by the Bundesbank, which he heads.

‘All in all, I weight the risks of government bond purchases as high’, he said, even if it is ‘undisputed that bond purchases can be a legitimate and effective monetary policy instrument.’ Of key importance is thus the continuous evaluation of potential side effects, he said.

A cautious approach is called for even in times of crisis, he said. ‘In deciding on the [ECB’s pandemic emergency purchase programme], it was particularly important to me that it be limited in time and clearly linked to the crisis: After the crisis, emergency monetary policy measures must be scaled back.’

In general, he demanded, monetary policy must be normalised when conditions warrant it so as to prevent risks from mounting over time. This will not be to everyone’s liking, he conceded, adding that high government debt could lead to pressure on central banks to defer normalisation.

In other comments, Weidmann said the German economy should grow ‘very strongly’ this quarter, but that this should not raise any ‘false hopes’, since economic recovery will ‘drag on’.