Weekly Review

Happy 60th, Lady Bundesbank

Not erotic, maybe, but so stable: The original Bundesbank building. Source: DPA

Mario Monti, a former prime minister of Italy who is sometimes called “the most German of Italian economists,” still grows sentimental when he recalls his first encounter with her. The year was 1972, he was attending a conference, and “the place was rather romantic — Lake Constance — though plagued by mosquitoes,” he reminisces in a conversation with Handelsblatt. “She was 15 and I was 29,” he recalls. Was it love at first sight? “Not really. I was quite shocked by the great simplicity, if not naiveté,” at first. Nonetheless, she cast a spell on him. As the years went by, did this love fade? “I think it’s not over and it’s going to last,” Mr. Monti says.

The lady in question is the Bundesbank (the noun is feminine in German). And though you can’t tell by looking at the decidedly unerotic exterior of her first headquarters in Frankfurt (above) — or at her current building, or really any other part of her, for that matter — she has always had a way of fascinating men in suits, even as she turns 60 this coming Tuesday. “Not all Germans believe in God but all believe in the Bundesbank,” a Frenchman, Jacques Delors, remarked in 1992, when he was president of the European Commission.

In the postwar years leading up to her birth, this mythology, as it later developed, would have seemed surprising, as Simon Mee, a scholar at Oxford and Humboldt University, shows in an essay for Handelsblatt Global. As the Allied Powers in West Germany prepared to hand monetary control back to the new nation, a controversy raged about what sort of central bank the country should have. Konrad Adenauer, the chancellor, was against complete independence from democratically elected politicians. Ludwig Erhard, his economics minister, was for it. Both sides referred to recent history — including two hyperinflations and one deflation — to make their arguments.

Almost alone in Europe, Germans feel the ECB is a bit of a floozy.

In the end, those favoring central-bank independence won. Thus was born the world’s fiercest guardian of price stability, almost autistic in its focus on preventing inflation — that was the “great simplicity, if not naiveté” that Mr. Monti referred to. Central bankers all over Europe and the world learned to respect, fear and envy the Bundesbank. But those holding her in the greatest esteem were the West Germans themselves. Facing a moral void as they coped with their Nazi past, they found a new institution that seemed incorruptible in its independence and kept their Deutschmarks safe.

Today, of course, she is just one of 19 regional banks in a new network governed by the European Central Bank. A bit fewer than 10,000 staff still work for her, managing bills and coins, regulating banks, stacking all those ingots of gold (which the Bundesbank is repatriating from its Cold War safes in New York, London and Paris), and doing research. But everybody knows that she is past her prime.

As she contemplates her estate planning, however, she can take comfort that her legacy will endure. Quite on purpose, the ECB is not only based around the corner in Frankfurt but also modeled on her philosophy of independence and price stability. Even so, the Germans have never quite embraced her as they did the Bundesbank. Almost alone in Europe, they feel the ECB is a bit of a floozy, bestowing easy money and easy favors on, you know, Mediterraneans.

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