Issing Interview

The ECB and the End of Unity

Otmar Issing sees deflation risk.
  • Why it matters

    Why it matters

    Otmar Issing argues many European central bankers have reverted back to a national mindset since the euro zone crisis – a destructive tendency for a central bank that should be setting policy for the euro zone as a whole.

  • Facts


    • Otmar Issing spent eight years as a board member of Germany’s central bank, the Bundesbank, before becoming the European Central Bank’s first ever chief economist in 1998.
    • Mr. Issing stepped down from the ECB in 2006 and has been president of the Center for Financial Studies at Frankfurt’s Goethe University ever since.
    • Among other things, Mr. Issing is credited with first proposing the ECB adopt an inflation target of “below 2 percent,”  a target that was revised in 2003 to “close to but below 2 percent.”
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Otmar Issing is credited with a lot of things. Most importantly, the German central banker steered the European Central Bank’s monetary policy in its early uncertain years, ushering in a brand new global currency, the euro. As the Frankfurt-based ECB’s chief economist from 1998 to 2006, Mr. Issing’s recommendations on interest rates went essentially unchallenged. Now, he says, everything has changed. The euro zone debt crisis – and the ECB’s role in solving it – has broken the unity the central bank once had. The Bundesbank, once the mold for the ECB itself, is struggling for relevance. Mr. Issing insists the German central bank can still play a constructive role.

Handelsblatt Global Edition: Mr. Issing, what exactly is the monetary policy role of the Bundesbank in the European Central Bank these days?

Otmar Issing: The Bundesbank president, like any other national central bank governor, has one vote on the ECB’s governing council. Ahead of the Maastricht treaty creating the euro, there were fierce discussions over whether “one person, one vote” was the right way forward. The skeptics were eventually convinced that weighting national votes would have gone against the idea of a common currency. The governors don’t sit in the ECB council as members of their countries but as independent individuals, who are called on to lead a single monetary policy that fits the entire euro zone.

And now, the ECB has introduced a rotation principle that will see the Bundesbank lose its voting rights some months out of the year. This has caused some concern in Germany.

I think all of this distracts from the main point, which is that the monetary policy decisions shouldn’t be about national interests but about the right monetary policy for the entire euro zone. That was the philosophy that the ECB council strictly followed in its first years.

What has changed since those early years? Why does there seem to be less consensus in the governing council today?

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