Introduction by Nout Wellink

It is a great pleasure for me to be able to introduce here today my friend and colleague Dr. Hans Tietmeyer, President of the Deutsche Bundesbank. It has been a very clever decision indeed to invite him to share his views with us. His long-ranging experience of economic and monetary policy issues makes him an excellent speaker on today’s subject. Hans Tietmeyer has worked in the international financial arena for more than 35 years. Very few people have been so closely involved in the process of European economic and monetary integration, which culminated in the introduction of the euro three months ago. One could say that, but for Hans Tietmeyer, the European monetary landscape definitely would have looked different today.   

Dr. Tietmeyer started his career as a civil servant in the German Economics Ministry, which he joined in 1962. His superior at that time was Minister Ludwig Erhard, founder of the German ‘Wirtschaftswunder’, who was later to become Federal Chancellor. As advisor to various ministers and chancellors, Hans Tietmeyer was continuously and closely involved in the negotiations about European monetary integration. In the early seventies, he participated in the Werner group. This group, consisting of representatives from the then six-member European Community, was charged with formulating proposals for achieving a monetary union by the end of the eighties. This was quite an ambitious target, as we are all very much aware today.

In 1982, Dr. Tietmeyer left the Economics Ministry to become State Secretary – the highest-ranking civil servant – of the

Finance Ministry, where he served under Stoltenberg and Waigel.

As State Secretary, he was involved in nearly every major European and international economic negotiation. He was a member of the EC’s Monetary Committee, which he chaired from 1984 to 1987. On behalf of Germany, he negotiated the Plaza and Louvre accords in 1985 and 1987. He also nego­tiated the intergovernmental conference which led up to the Maastricht Treaty.

In 1990, after three decades of service in Bonn, Hans Tiet­meyer was appointed a member of the Board of the Deutsche Bundesbank. But it soon became clear that Bonn could not do without his expertise. Hardly had he emptied his suitcases when he was called back to Bonn to serve as Chancellor Kohl’s advisor on the German reunification. In the late summer of 1990, he returned to the Bundesbank, this time to stay. He became Vice-President in 1991, when Karl-Otto Pöhl resigned, and in 1993 he succeeded Helmut Schlesinger as President. Since 1994, Dr. Tietmeyer has been chairman of the G-10 central bank governors. 

Hans Tietmeyer not only brings with him a great deal of experience. What is even more important is that he has the right personal characteristics for a central banker. This again became abundantly clear this afternoon, when he visited De Nederlandsche Bank and discussed the future of the EMU system with a small group of directors and senior staff members.

His intellectual capacities are undisputed. Besides, he is a very ambitious man. Always bent on achieving concrete results. Once, when asked what he would like to become, he replied: ‘Me? Only better than I am.’

Hans Tietmeyer is a very hard worker. As a teenager he took up various jobs to finance his studies. Once he had a 50 marks a month job in a coal mine. Fortunately, he soon realized that mining was not a very promising sector. As far as I know, there is no other central bank governor who ever worked in a coal mine. Later, he was awarded honorary membership of the German miners’ union. Those were times, you may well say!

He is also a keen sportsman or, perhaps I should say, he was in his younger years. As a student his passion was table tennis, and he succeeded twice in winning the national university championships. The Dutch may count themselves lucky that Hans Tietmeyer never seriously took up soccer.

Born in Metelen, he was destined to become a central banker. Metelen is a small village in Westphalia, between Münster and the Dutch border. The soil in this part of north-western Europe is eminently suited to growing the best central bankers. Wim Duisenberg was born only some two hundred kilometres from there. Paul Volcker, whose father emigrated to the US from Germany, stems from the very same area as Hans Tietmeyer. My own birthplace, Aalten, is a mere 50 kilometres from Metelen, but that, of course, is just a coincidence.   

Apart from my personal respect for Dr. Tietmeyer, I would like to stress the fact that, as far as monetary policy is concerned, De Nederlandsche Bank and the Bundesbank have been hand in glove for a very long time. The Netherlands was the first country to adopt a hard currency policy in the sense of orienting its exchange rate policy towards the German mark. Firstly, because of the importance of the German economy, and secondly because of the German priority for price stability. After 1983, we explicitly pegged the guilder to our neighbour’s currency. Ever since, our exchange-rate policy has been considered credible by the markets. The guilder-DM peg has in fact hardly been tested. It is not without reason that after the ERM crisis in 1992 only the Dutch succeeded in continuing the peg to the German mark. Whereas the fluctuation margins for the other currencies participating in the ERM were widened to 15%, we concluded a bilateral arrangement with the Germans to keep our currencies within a 2.25% fluctuation margin. 

Since 1 January 1999, the face of European monetary policy has changed beyond recognition. Eleven European countries have surrendered their monetary policy autonomy to the supranational level. European monetary policy is now conducted by the Eurosystem, which consists of the European Central Bank and the national central banks of the eleven euro-area countries. Monetary policy serves just one purpose: maintaining price stability. To that extent, nothing has changed as far as the Bundesbank and De Nederlandsche Bank are concerned. Monetary policy decisions are taken by the Governing Council of the ECB, of which Hans Tietmeyer and myself are both members. Within the Governing Council, all members, irrespective of whether they represent a large or a small country, have an equal vote.

The euro-area countries may no longer conduct a monetary policy of their own, designed to maintain the value of the national currency. For us in The Netherlands, this was a major step, which, however, we did not find hard to take emotionally. The fact was that De Nederlandsche Bank had already traded its discretionary powers in the area of monetary policy for the guilder’s peg to the Deutschmark. And, indeed, this has certainly not done us any harm, since it has enabled us to import the low German inflation rate and the low German interest rates. One might even say that the monetary policy sovereignty which we had surrendered voluntarily has been regained in part now that monetary policy has become a matter of common concern. This, of course, also holds for other euro-area countries.

Where Germany and the Bundesbank are concerned, things are totally different. For them, surrendering monetary policy sovereignty has been a move calling forth much deeper emo­tions. Unlike the other central banks, the Bundesbank really had something to lose. The German population as a whole is keenly aware of this. The mark was the most stable currency in the world, the very symbol of the ‘Wirtschaftswunder’. The impact which the start of EMU must have had on the German public has been aptly characterized by Jacques Delors, when he said: ‘Not all Germans may believe in God, but all of them believe in the Bundesbank.’

The ECB patterned on the German model. De Nederlandsche Bank and the Bundesbank normally take a common stand, as was clearly reflected in the position we took in the negotia­tions about the institutional framework of the Eurosystem. With regard to the monetary policy framework, we have almost invariably and almost completely shared each other’s views.

Monetary power in Europe is now a shared power. The new currency still has to prove itself. The Eurosystem does not yet have, and indeed cannot yet have, the same track record as an inflation fighter as that enjoyed by the Bundesbank. However, the institutional setting of the European Central Bank and its policy framework are as many guarantees for a euro that will be as strong as the Deutsche mark. In order to permit the Eurosystem to inherit as much of German monetary stability as possible, it has been patterned on the German model. Fully in line with German – and for that matter Dutch – tradition, it has been laid down explicitly that the European central bankers may not be influenced in any way by the political institutions. Central bank independence is a precondition for a successful monetary policy. The Bundesbank fully reflects this fundamental notion; its independence has even been enshrined in the German constitution. With Hans Tietmeyer in the forefront, the Germans have succeeded in achieving the inclusion in the Treaty of strict provisions warranting the independence of the Eurosystem. 

Hans Tietmeyer knows better than anyone else what it feels like when the independence of the central bank is put to the test. In the run-up to the introduction of the euro, he was Europe’s most influential central banker and came under heavy fire from various quarters. As guardian of the European anchor currency, the Bundesbank played the first fiddle, monetarily speaking. This had inevitably as a consequence that its policies were not always universally seen as appropriate. In this context, it is worthy of note that Hans has never been blamed for keeping interest rates at too low a level.

‘Steady as a rock’, that I think adequately characterizes him. Not prepared to succumb to whatever pressure is brought to bear. And pressure was brought to bear, notably in the first half of the 1990s, by other countries. At that time, a large number of European countries had to submit to the German yoke of what they considered unduly high interest rates. The high interest rate levels were absolutely necessary given domestic inflationary movements consequent on the German reunifi­cation.

Pressure from abroad, that was seen as a fact of life. Less self-evident was the attack launched last autumn from completely different quarters. German politicians brought heavy pressure to bear on the Bundesbank and later on the ECB, in vain as events have shown. For the moment, the pressure has blown over. Politicians commenting on monetary policy is, however, an everyday occurrence and something that we have come to see as a fact of life. And indeed we do well to listen carefully and weigh their arguments. That is, however, not the same thing as being influenced. A constructive dialogue with the political institutions about monetary policy may be of great use, for as long as it does not give rise to inflated impressions of what monetary policy can do and for as long as letter and spirit of central bank independence are respected. That can only benefit price stability and balanced growth. To leave no doubts whatsoever,I quote from Article 107 of the Treaty: ‘The Community institutions and bodies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks.’

The objective of the Eurosystem, maintaining price stability, is the same as that of the Bundesbank. Price stability has been defined as an annual increase of less than 2% in the European consumer price index. In the pursuit of this objective, the Eurosystem, like the Bundesbank, has assigned a major role to the money supply. The instruments used by the Eurosystem in implementing its monetary policy are likewise patterned on the German model. All this makes it possible to take over much of the Bundesbank’s reputation as an inflation fighter, a reputation that is embodied in the person of Hans Tietmeyer. The Bloomberg Hawk-o-meter, which rates central bankers in terms of their aversion to inflation, recently awarded Hans a rating of 8.4.

An influential central banker, ladies and gentlemen, Dr. Hans Tietmeyer is definitely one of the most influential central bank governors in European history. As President of the Bundesbank he has faced the impact of the German reunification, the ERM crises in 1992 and 1993, and has played a crucial role on the bumpy road that led to the Economic and Monetary Union and the introduction of the single currency on 1 January 1999. For as long as the monetary authorities come from the same mould as Hans Tietmeyer, we have no cause for concern about the independent position of the ECB or about monetary stability in Europe.

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