A powerful phalanx of key statesmen, from US President Barack Obama to French President François Hollande and British Prime Minister David Cameron, have long called upon Weidmann to finally abandon his resistance to the increased use of the ECB’s “big bazooka.” Now even some of Weidmann’s former allies are turning their backs on him. Recently, Germany’s powerful private banks have come out in support of Draghi, as have Weidmann’s fellow ECB Governing Council member Jörg Asmussen and a majority of monetary policy experts in Northern Europe.

[…] It was all the more surprising that the new Bundesbank president was soon openly championing Germany’s positions even more staunchly than his predecessors. Whereas Weber and Stark tended to keep their criticism to themselves, Weidmann, in speeches, op-ed pieces and interviews, warned of the dangers of a misguided euro crisis policy. He was regularly outvoted in the ECB’s Governing Council. Nevertheless, ECB President Draghi soon realized that it would be foolish to ignore Weidmann’s most powerful weapon: the deep-seated and well-founded mistrust that always takes hold in the population when politicians push for banks to start printing money.

When Draghi talked of a possible new bond buying program a few weeks ago, Weidmann’s resistance was to be predicted. In light of rising interest rates for Spanish and Italian bonds, Draghi felt the need to send a strong signal to the markets. Without consulting with his colleagues on the ECB Governing Council first, he announced, during a speech in London at the end of July, that the ECB would do everything in its power to save the euro. “And believe me, it will be enough,” he added cheerfully.

[…] Members of Merkel’s and Schäuble’s staffs appear to accept Weidmann’s notorious opposition to Draghi with a shrug. At the Chancellery, where the young Bundesbank president used to work, there has even been malicious talk of “fundamentalists.” In the Finance Ministry, too, Weidmann is increasingly regarded as a troublemaker. “Some people interpret the ECB’s mandate more narrowly. Others interpret it a bit more broadly,” says a senior Finance Ministry official, with a trace of fatalism in his voice.

Privately, Chancellor Merkel also has little sympathy for the intransigence of her former adviser. Merkel apparently feels that Weidmann and his staff shouldn’t be making such a fuss.

[…] Merkel and Weidmann have talked a lot in recent weeks, sometimes by telephone and sometimes in private at the Chancellery in Berlin. As a result, they have reached a sort of temporary truce.

Weidmann, who doesn’t see himself as being isolated, will continue to openly voice his criticism of the Draghi program, but he will not torpedo the effort for the time being. He will implement the ECB decisions and will not file a complaint with the European Court of Justice. In return, Merkel will show an understanding for Weidmann’s positions, but she will not support them.

It’s a stalemate that benefits both Weidmann and Merkel. Weidmann doesn’t want to overdo the conflict, given his ambitions to eventually head the ECB himself. Merkel, on the other hand, has no interest in having a fundamental dispute with the Bundesbank.

The challenges of having a single monetary policy but loosely coordinated fiscal, economic and financial policies have been clearly revealed by the crisis. As Jean Monnet said, coordination “ is a method which promotes discussion, but it does not lead to a decision.” And strong decisions have to be made to manage the world’s second most important currency.

[…] From the ECB’s perspective, a strong economic union is an essential complement to the single monetary policy. Building this will require a structured process with correct sequencing. Yet citizens can be certain that three elements will remain constant. The ECB will do what is necessary to ensure price stability. It will remain independent. And it will always act within the limits of its mandate.

Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools. When markets are fragmented or influenced by irrational fears, our monetary policy signals do not reach citizens evenly across the euro area. We have to fix such blockages to ensure a single monetary policy and therefore price stability for all euro area citizens. This may at times require exceptional measures. But this is our responsibility as the central bank of the euro area as a whole.