A Banker of Steely Austerity Bows Out

So farewell, Hans Tietmeyer

So farewell, Hans Tietmeyer. Last Monday, the highly-respected president of Germany's Bundesbank, and one of the staunchest defenders of currency stability, bowed out after six years at the helm. He handed over to Ernst Welteke, another banker and a lifelong Social Democrat, whose "easygoing, sunny personality" - according to this newspaper - "is in stark contrast to his predecessor's steely austerity."

This is a little unsettling. Most of us with a few bob in the bank would become very, very nervous if we learned that the people of steely austerity charged with looking after our savings, however paltry, were to be replaced by bankers with easygoing, sunny personalities, and quite possibly wearing beige suits. The notion of such laid-back executives looking after national funds on our behalf in a central bank (like the Bundesbank) hardly bears thinking about.

Fortunately we don't have to worry too much. When Hans Tietmeyer took over at the Bundesbank, he himself was seen as a softer and more approachable version of his predecessor, Helmut Schlesinger. On his appointment, Tietmeyer immediately took leave of absence, called on as he was by Helmut Kohl (for whom he served as a "sherpa" at the international economic summits of the 1980s) to negotiate monetary union between East and West Germany. One commentator wrote at the time that "to have asked Mr Schlesinger to perform that task would have been like suggesting that the Pope take six months off to run Caesar's Palace." No reflection of course on Pope John Paul, who would undoubtedly have done a good management job in Las Vegas (and enjoyed it too). The point was that Tietmeyer was seen as an efficient manager, far less grand and remote than Schlesinger, willing to risk his reputation and get his hands dirty if necessary. Ernst Welteke will very probably turn out to be much in the same mould, even if he shows a bit more charisma than Tietmeyer, who is reputedly lacking in personal charm.

But the fact that Welteke is a close friend of Germany's Finance Minister, Hans Eichel, will not necessarily endear him to the German public as much as it will to the banking fraternity, or that creepy element of it that would like to see a seamless line between banking and politics. Hans Tietmeyer is a great favourite with many ordinary Germans (or at least those with jobs) who appreciate how he famously stood up to the government and in particular former Finance Minister Theo Waigel (his old boss) when they attempted to hijack the country's gold reserves in a truly Jesuitical plot to hang blinds over holes in the federal budget.

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Which brings us to the quasi-religious aspect of all this. On the day Tietmeyer retired, among those paying tribute to him was European Central Bank (ECB) president Wim Duisenberg, who unctuously said that "Following a speech by Hans Tietmeyer is like following a sermon by the Pope."

This is a considerable exaggeration, even if the top Bundesbank officials are sometimes called the "money cardinals". Anyone who has heard or read any of Tietmeyer's speeches will confirm that they are forceful models of logic and precision, but far from inspiring. But of course Duisenberg, who got the ECB presidency only after an embarrassing row, is only repaying a favour: a couple of years back, Tietmeyer publicly backed Duisenberg for the ECB job, describing him as "the natural candidate to head the ECB - he certainly deserves the European Bank of the Year award for his policies."

Meanwhile this newspaper report noted that the reference to the Pope was apt not only because Tietmeyer is a former theology student and a devout Catholic, but also adheres absolutely to the orthodoxy of sound money.

The orthodoxy of sound money has to be a very sound policy in a country which has already experienced two devastating hyperinflation crises. The Kaiser created the first of these when he funded the Great War by the delightfully simple policy of borrowing, then inflating. The Weimar Republic then made things a hell of a lot worse by printing more reichmarks, which moved from just over four to the dollar in the middle of 1914 to around 4 trillion to the dollar over the next nine years. A child of average intelligence could have predicted this outcome. People suffered.

Hitler later funded his own war effort by printing more money, again leading to hyperinflation. Subsequently, with a little help from American general Lucius Clay, the commander of the US forces in Europe, the egghead economist Ludwig Erhard had to sort things out with the introduction of the deutschemark.

Now of course, with four million unemployed, Germany is worried - as well it might be - about a recurrence of "Weimar conditions." Hans Tietmeyer is well out of it, and good luck to sunny, easygoing Ernst Welteke in the dying days of the deutschemark.