Germany's finance minister and central bank chief on Friday pressed euro zone governments to pass reforms to shape up their economies rather than rely on the European Central Bank for help.

In Madrid, Bundesbank chief Jens Weidmann said loose monetary policy had "done its bit" to maintain price stability in the euro zone and urged governments to "keep the pedal to the metal" on reforms and respect Europe's fiscal rules.

In Paris, German finance minister Wolfgang Schaeuble said monetary policy could give governments time to reform but could not achieve everything, urging them to focus on improving economic competitiveness rather than on the euro exchange rate.

The Germans’ double-barreled warning shot for euro zone governments came against the backdrop of a debate among the bloc’s policymakers about the flexibility of their fiscal rules, and calls from French officials for the ECB to weaken the euro.

"We should not overestimate the capacity of central banks to solve the crisis. It is not up to us to solve the crisis," said Mr Weidmann, whose role as Germany's central bank chief gives him a seat on the ECB's policymaking Governing Council.

“The crisis is a structural crisis and has to do with a loss of competitiveness and has to do with indebtedness that is considered unsustainable in some countries,” he added after giving a speech at the Madrid stock exchange.

Mr Weidmann, the leading hawk on the ECB Council, said an excessively generous interpretation of leeway in fiscal rules enshrined in Europe’s Stability and Growth Pact would undermine its credibility.

Italian prime minister Matteo Renzi, who has led calls to move from austerity to expansion, said earlier this month the Bundesbank should not comment on Italian government policies.

Mr Weidmann defended his right to call for structural reforms and budget consolidation, saying the ECB had bought governments time to act and that sustainable public finances play a key role in buttressing monetary policy aimed at keeping prices stable.

Mr Schaeuble echoed the Bundesbank chief’s call for countries to reform their economies to make them more competitive.

“Monetary policy can give time to put reforms in place but cannot do everything,” he told a conference in Paris.

Mr Schaeuble also pushed back at French policymakers and businesses who have complained about the strength of the euro and asked for the EU and the ECB to do more to weaken it. Germany has insisted on the independence of the ECB.

A strong euro has its advantages, Mr Schaeuble said, adding: “We have to concentrate on whether the European economy is competitive and then we will have an appropriate exchange rate.”

Mr Weidmann cited a litany of long-term dangers from easy money after the ECB cut interest rates to record lows last month as part of a package of measures to breathe life into a sluggish euro zone economy.

“In the long term, the ultra-loose monetary policy poses risks to financial stability,” Mr Weidmann said with reference to the policy decisions announced by the ECB in June.

“There is a danger of exaggerations on the asset and real estate markets - just think of the hunt for yield,” he added in the text of a speech entitled ‘Towards a more stable European monetary union’.

“Low interest rates also ease the pressure on governments to vigorously tackle their countries’ problems,” he said. “There is a danger that the low interest rates will be used not to consolidate budgets, but to finance additional spending.”

The Bundesbank chief said the Eurosystem of euro zone central banks - the ECB and its stakeholders - must not give governments an easy ride by leaving interest rates lower than needed to deliver stable prices.

“So it is particularly important to make it quite clear now that the Eurosystem will not put off a necessary increase in central bank interest rates out of consideration for public finances,” Mr Weidmann said.

“Looking at the euro area, I would therefore say that monetary policy has done its bit towards maintaining price stability,” he added. “Finally, monetary policy must not allow itself to be misappropriated for fiscal policy purposes.”

Reuters