Bundesbank chief warns of risks from cheap money

By John O'Donnell

WIESBADEN, Germany (Reuters) - The dip in oil prices will save German companies and individuals 25 billion euros ($28 billion) this year, the head of the Bundesbank said on Tuesday, as he warned of the perils of keeping the cost of money too low.

"The expansionary monetary policy should not go on for longer than is absolutely necessary," Jens Weidmann told an audience near Frankfurt, saying the economic recovery in the 19-member euro zone was holding steady.

The remarks from Weidmann illustrate the continued scepticism in Germany about the need to extend the European Central Bank's 1-trillion-euro-plus money printing program.

While such opposition cannot prevent extra money printing, it can delay any such move.

Weidmann, who also sits on the ECB's policy-setting Governing Council, argued that cheap money, with borrowing rates at record low in the euro zone, risked that financial markets would 'overdo it'.

He also pointed to the threat that permanently low borrowing costs would keep 'zombie' companies afloat that should be out of business.

Weidmann also criticized the negative impact of low interest rates on German savers, who he said earned a fraction of a percentage point of interest on their deposits.

(Additional reporting by Balazs Koranyi in Frankfurt; Additional reporting by Keith Weir and Emma Thomasson in Berlin; Editing by Janet Lawrence)

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