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Analysis
The man who knew about the euro

The man who knew about the euro

Tietmeyer: fundamentalist who defended and buried the D-mark

by David Marsh in London

Tue 3 Jan 2017

Hans Tietmeyer, the German finance ministry and Bundesbank veteran who died last week aged 85, foresaw the economic and political strains befalling Europe’s monetary union – but was unable to implement the safety mechanisms to prevent them happening. 

His passing comes at a poignant time for Germany and Europe. In 2017, as vital elections loom and political solidarity appears to recede across the continent, make-or-break decisions are due on support for troubled members of the euro, above all Italy and Greece. Yet the far-reaching political union Tietmeyer always said was needed to underpin Europe’s money seems as far away as ever.

Tietmeyer, Bundesbank president between 1993 and 1999, including the run-up to and introduction of the euro, was Germany’s most political central bank chief. He goes down in history, too, as the most active. His career encompassed scores of international monetary negotiations and decisions over a crucial 30-year period.

An active Christian Democrat and confidant of Chancellor Helmut Kohl who survived a terrorist assassination attempt in the 1980s, Tietmeyer brought a steely, orthodox mind to the helm of German finance. But he was aware that politics would have the final say over the D-mark’s replacement by the new European currency.

Like his immediate predecessor Helmut Schlesinger, a still-sprightly 92, with whom Tietmeyer worked as deputy president in the controversial 1991-93 currency period, Tietmeyer could always count on Kohl’s support at fraught moments. This was in marked contrast to Karl Otto Pöhl, Bundesbank president in the 1980s, a Social Democrat and former protégé of Chancellor Helmut Schmidt. Pöhl, who could be as frivolously sardonic as Tietmeyer was earnest, regarded the younger man as a permanent rival, and resigned in 1991 after deep disagreement with Kohl over German reunification. He died in December 2014, also aged 85.

A decade earlier, in October 1982, as a hard line economic functionary in pre-unification West German governments in Bonn, Tietmeyer played an important role in Schmidt’s political demise. He drafted a free market-leaning text by Otto Lambsdorff, then economics minister, which paved the way for the liberal Free Democrats’ coalition switch away from Schmidt’s SPD, bringing Kohl to power after years in the opposition wilderness.  Tietmeyer was at the centre of successive economic flash-points. They ranged from 1980s currency accords with President Ronald Reagan’s administration and the D-mark’s 1990 introduction into East Germany, to European bargaining with British Prime Minister Margaret Thatcher and heated exchanges with France in the 1992-93 monetary squalls.

Tietmeyer had a sensitive side often concealed by grinding rhetoric and a battering ram-style diplomacy. His self-depiction as an unyielding Westphalian oak became a central banking cliché. In 1996 Schmidt testily but inaccurately labelled Tietmeyer as the euro’s most powerful adversary.  Behind the habitual blunderbuss, Tietmeyer could be a patient and sympathetic interlocutor. And his instincts over monetary rapprochement with France – an essential but frequently troublesome ally over the single currency project - were more attuned with European Realpolitik than those of Pöhl or Schlesinger. Jean-Claude Trichet, the long-time French Treasury director, Banque de France governor and European Central Bank president, saw in Tietmeyer a friend, supporter and role model. Trichet’s signals of affection were not always fully reciprocated.

Tietmeyer grew up in the 1930s in a large catholic family near largely protestant Münster. He once aspired to become a priest like two of his brothers. He brought theological fervour to defending the D-mark’s sanctity.  But, by presiding over its incorporation into the euro, he ended up burying Germany’s quintessentially hard currency. In a wistful 1991 speech, Tietmeyer said he saw no reason to speed up European monetary union as a result of German unification, since Germany risked giving up ‘one of the world’s most successful and best monetary constitutions’.

In ceaseless 1990s European jousting, Tietmeyer was the main inspiration behind the nomenclature ‘euro’. He stubbornly insisted that the independent Bundesbank should become the model for the future European central bank. As Tietmeyer’s close relationship with Kohl demonstrated, independence was never as absolute as the Germans often depicted. Kohl could use Tietmeyer’s fundamentalism as a crucial lever to win European partners’ acceptance for Germany’s euro policies. But neither man’s efforts were sufficient to protect the new currency from inborn contradictions.

Tietmeyer believed, in the best German economic tradition, that monetary union should eventually ‘crown’ a long journey of economic harmonisation and political integration. From the 1970s onwards, he held to the credo, most recently in a video interview with me released by the Bundesbank in August last year to coincide with his 85th birthday.

In countless warning speeches in the 1990s, Tietmeyer pointed to the dangers confronting monetary union unless it encapsulated political union, durable economic convergence and sufficient flexibility to weather unalterably fixed exchange rates. None of these three conditions was fully satisfied. Yet Tietmeyer and the Bundesbank – propelled by the overriding need to keep faith with France – had no option but to acquiesce, in a landmark decision in March 1998, in the D-mark’s liquidation.

Tietmeyer was unflinching in portraying monetary union’s inherent problems. He knew, equally, that his failure to repair them would form an imperishable and unsatisfactory part of an otherwise well-burnished legacy.

David Marsh is Manging Director of OMFIF. 

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