Former Bundesbanker

The last guardian of the deutsche mark

  • Why it matters

    Why it matters

    Hans Tietmeyer identified a lack of budget discipline as the Achilles Heel of the euro single currency and was proved right.

  • Facts

    Facts

    • Hans Tietmeyer, the president of the German central bank, the Bundesbank, from 1993 until 1999, died on Tuesday aged 85, the bank said on Wednesday.
    • Mr. Tietmeyer was one of the architects of the euro single currency and was an outspoken critic of European governments that failed to consolidate their budgets.
    • He survived an assassination attempt by left-wing militants in 1988 because their submachine gun jammed.
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Hans TIETMEYER
Former Bundesbank President Hans Tietmeyer, who died on Tuesday aged 85. Source: DPA

Hans Tietmeyer, who ran Germany’s central bank, the Bundesbank, between 1993 and 1999 in the turbulent run-up to the launch of the single currency, died on Tuesday at the age of 85, the Bundesbank said on Wednesday.

He was Europe’s most powerful central banker as the last Bundesbank president in charge of Germany’s rock-solid deutsche mark before it was replaced by the euro.

His mantra at the time – that Europe needed closer political union and more budget discipline to underpin the stability of the euro – fell on deaf ears in national capitals until the European debt crisis in 2010-2011 exposed flaws in the make-up of the single currency that Europe has struggled to rectify ever since.

“Hans Tietmeyer was an important gurantor of stablity and the market economy...His clever, cautionary voice will be missed.”

Wolfgang Schäuble, German Finance Minister

“Hans Tietmeyer was an outstanding president whose actions always followed clear and firm lines with the aim of monetary stability,” said current Bundesbank President Jens Weidmann in a statement.

Today’s Bundesbank is a pale shadow of its former self. Mr. Weidmann is just one of 25 members of the European Central Bank’s governing council and has been frequently outvoted in the past few years on interest rate decisions.

Mr. Tietmeyer, by contrast, had far more clout. Before the euro’s introduction, the Bundesbank effectively dictated the level of interest rates across Europe.

Wherever he headed, central banks across the continent had to follow to keep their currencies within the bands set by the European Exchange Rate Mechanism, a precursor to the euro aimed at ensuring monetary stability in Europe. Such was the power of the currency of Europe’s largest economy.

He was outspoken, regularly voicing frank and open criticism of German government policy and also admonishing other European nations that failed to live up to the budget discipline he knew was needed to keep the future European currency safe.

He was also known as a skilled communicator with financial markets, keenly aware of the market impact of his words and adept at subtly flagging interest rate decisions, drawing comparisons to former Federal Reserve chairman Alan Greenspan in the United States.

“Hans Tietmeyer was an important gurantor of stablity and the market economy,” German Finance Minister Wolfgang Schäuble told Berlin newspaper Tagesspiegel, a sister publication of Handelsblatt.

Mr. Schäuble said he was “personally impressioned” by the role Mr. Tietmeyer played in Germany’s reunification, a process in which Mr. Schäuble also played a key part. “His clever, cautionary voice will be missed,” he added.

Hans Tietmeyer
A supporter of the European single currency, Hans Tietmeyer was in charge as the cherished deutsche mark was replaced by the euro. Source: Uwe Zucchi/dpa

Mr. Tietmeyer once said that his roots in the village of Metelen near the Dutch border, where he was born into a large family with 11 children, gave him a solid grounding. He once likened himself to a “Westphalian oak.” Gnarled, resilient, unshakable.

The son of a local government official, he studied economics and joined the West German economics ministry in 1960. A member of the conservative Christian Democratic Union party, he was deputy finance minister under Chancellor Helmut Kohl and a close confidant between 1982 and 1989, organizing annual meetings of the Group of Seven leading industrialized nations and playing a key role in international agreements to stabilize global exchange rates.

That put him in the sights of the Red Army Faction, a group of left-wing militants. In 1988, he survived an assassination attempt by them while he was being driven through the West German capital, Bonn. The RAF later said a jammed gun saved his life.

In 1989, he brought the new finance minister, Theo Waigel, up to speed on the massive challenges he would face with German unification.

Mr. Waigel later recalled sitting in Mr. Tietmeyer’s home and falling asleep as his tireless tutor droned on.

Mr Tietmeyer mercilessly continued the lesson until Mr. Waigel woke up again. The passages he missed were not repeated.

Hans Tietmeyer
Former Bundesbank president Tietmeyer (left) and former German finance minister, Theo Waigel, in a meeting with their French counterparts Jean-Claude Trichet (center-left) and Jean Arthuis (center-right)Source: Rene Paetow/dpa

After he retired as head of the Bundesbank, he remained active in various public bodies and continued to call for budget consolidation.

“One mustn’t underestimate the risk of a lack of budgetary discipline for the euro,” he told Wirtschaftswoche magazine in November 2007, before the financial crisis set in motion a chain of events that almost brought the single currency to its knees.

The euro member states including Germany kept on flouting the rules of the European Stability and Growth Pact he had helped to arrange. It disappointed him, but he never distanced himself from the euro.

Nor did he voice public criticism of the European Central Bank, the institution that replaced the Bundesbank as the guardian of monetary stability in Europe, even as other German central bankers like Axel Weber became outspoken critics of the central bank’s aggressive policies to rescue the euro in the last few years and resigned from their posts in protest.

“Germany and Europe have much to thank Hans Tietmeyer for,” former ECB president Jean-Claude Trichet said in a speech at a ceremony for Mr. Tietmeyer in March 2010. “He was resolute in ensuring that the euro would be a stable currency.”

 

David Crossland is a freelance editor for Handelsblatt Global. Christopher Cermak of Handelsblatt Global also contributed to this story. To contact the author: cermak@handelsblatt.com

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