FRANKFURT?German central-bank President Jens Weidmann called for a "levelheaded" response to Donald Trump's unexpected victory in U.S. elections, but warned that uncertainty over the future direction of U.S. policy was weighing on the eurozone's growth prospects.
"I would first of all advise calm and levelheadedness," Mr. Weidmann, who sits on the ECB's 25-member governing council, said in a speech in Berlin. He pointed to comments in Mr. Trump's victory speech, indicating that the president-elect would deal fairly with other nations and seek common ground.
"Let's take the newly elected president at his word," Mr. Weidmann said.
But the Bundesbank president warned that the U.S. election result, together with Britain's vote to leave the European Union, raised questions over how far protectionism will determine the future political agenda.
"A significant part of our prosperity is based on open markets and functioning institutions," Mr. Weidmann said.
ECB policy makers are currently preparing for a key meeting on Dec. 8, when they are expected to decide on the future of their ?80 billion a month bond-purchase program, which is due to end in March. Some analysts say Mr. Trump's victory makes it more likely that the ECB will extend or boost its bond purchase program.
Mr. Weidmann?long a critic of the ECB's bond purchases?stressed that the central bank's easy-money policies shouldn't be kept in place for too long. He said their effectiveness faded over time even as their adverse side effects mounted, including declining profit for the region's banks.
"The therapy of an ultraloose monetary policy shouldn't be continued for longer than needed," he said.
Speaking in Tallinn earlier on Thursday, Ardo Hansson, who sits on the ECB's governing council as head of Estonia's central bank, didn't rule out that the U.S. election result could impact the ECB's policy deliberations in December.
"We need a little bit more time" to assess the impact, Mr. Hansson said. "We still have several weeks until December. By that time we'll have a much clearer idea."
The ECB is also expected to change the design of its bond-purchase program at its next policy meeting to ensure it doesn't run out of bonds to buy. Under its current rules, the ECB buys mainly government bonds in proportion to the size of each eurozone economy. It can't buy more than 33% of most bond issues, or bonds yielding less than minus 0.4%. That excludes a large share of German government bonds.
Mr. Weidmann cautioned against violating the program's "red lines."
"It is decisive that the current government-bond purchase programdoesn't envisage loss-sharing or introduce shared liability for government debt through the back door," he said.
Write to Tom Fairless at firstname.lastname@example.org
(END) Dow Jones Newswires
November 10, 2016 22:35 ET (03:35 GMT)
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