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Analysis
Tribute to Karl Otto Pöhl

Tribute to Karl Otto Pöhl

(1929-2014)

by David Marsh

Wed 10 Dec 2014

Karl Otto Pöhl, who died on Tuesday aged 85, was the most prescient, erudite, eclectic, international and impatient president of an institution that, more than any other, shaped post-war Germany.

For nearly a dozen action-packed years, between 1980 and 1991, he headed the Deutsche Bundesbank, the central bank that presided over the D-Mark and now, 15 years after the birth of monetary union, is leading a rearguard action to preserve its legacy.

Born into poverty in 1929, just four months before the man who became his nemesis during the 1980s, Chancellor Helmut Kohl, Pöhl strode to prominence on the monetary scene in the febrile atmosphere of Bonn, the provisional capital of a state that itself turned out to be provisional: pre-unification West Germany.

Pöhl, never a stranger to controversy, nearly always ready for opinionated discussion and sometimes waspish dialogue, was a curiously un-German figure in a country which, after the second world war, strove normally to attain consensus and avoid confrontation.

Famed for plain speaking but ultimately impaled politically by his inability to cut deals with Germany’s elected rulers, Pöhl – a one-time sportswriter and economic journalist – became a pivotal figure on the international monetary stage in his 40s as a key adviser to Chancellor Helmut Schmidt in tortuous negotiations with the US, Britain and France.

Although unknown to the wide public, no other contemporary international figure played such an important behind-the-scenes role in economic brinkmanship with successive British prime ministers Edward Heath, Harold Wilson, James Callaghan, Margaret Thatcher (who, famously, admired him more than any other German alive or dead) and John Major.

Up to his resignation in 1991, for complex personal and political reasons including disagreement with Kohl over the financial tactics behind German unification, he spent 20 years at the helm of global finance.

His quick wit, rapport with journalists (especially from the Anglo-Saxon press including the Financial Times) and readiness to forge personal contacts with financial leaders ranging from Paul Volcker of the US Treasury and Federal Reserve to Dutchman Wim Duisenberg and Frenchman Jacques de Larosière afforded him near-iconic status on the global stage.

But cult-like importance abroad was achieved at the cost of diminishing political support at home, where he attained a reputation for not suffering fools gladly – an otherwordliness that ultimately led to his departure from a central bank over which he presided with relish and esteem but which he never truly regarded as his home.

After his Bundesbank career he built up considerable domestic and international commercial expertise at the forefront of the German private bank Oppenheim before – in the aftermath of his own retirement - he became himself a victim of the managing partners’ own mismanagement when the bank fell upon hard times, and folded in the early years of the new millennium.

In a convoluted period of swirling international financial diplomacy, he played front-line roles in weathering the 1971-73 breakdown of the Bretton Woods exchange rate system and helping mastermind the establishment of the 1979 European Monetary System.

He participated, somewhat reluctantly, in preparations for economic and monetary union in the 1988-89 committee under European Commission president Jacques Delors, a man with whom he shared antipathy rather than the famous post-war Franco-German spirit of fraternity. Pöhl became celebrated among Delors committee members for reading not monetary documents but newspapers during the meetings.

Pöhl was never a convert to the euro. He forecast, in a much-quoted remark in June 1989 (made to me in an interview in Frankfurt), ‘considerable resistance’ from the German people once they understood that monetary union ‘centres on their money’. This is a prediction that now appears to be coming true.

One of the reasons why Pöhl ultimately grew tired of the Bundesbank and sought to escape from its shackles was his aversion to being bound by the voting power of the querulous provincial central bank presidents of West Germany’s federal states on the Bundesbank’s policy-making council.

In a curious reworking of history, Mario Draghi, presiding 30 years later over the European Central Bank in Frankfurt, is facing similar opposition to his policies from the ECB’s decision-making council. This time the resistance is led by none other but Pöhl’s eventual successor, another former chancellor's adviser-turned-central bank governor, the Bundesbank’s chief Jens Weidmann – with results that could lead to more convulsions down the road.

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