The sad final days of the Deutschmark and the meaninglessness of economic league tablesby John Plender / May 20, 1998 / Leave a comment
So it’s goodbye to the once mighty Deutschmark. After last month’s grudging fiat from European central bankers, economic and monetary union is inevitable. Schadenfreude all round, as the Bundesbank is condemned to the status of a sub-post office in the European central banking system.
This abandonment of national currencies is clearly momentous. But European idealists should not let it go to their heads. Emu’s origins, remember, lie in French economic diplomacy that could fairly be described as war by other means.
I first understood this when I interviewed the then head of the Bundesbank, Karl Otto P?hl, for the BBC’s Money Programme in the late 1980s. Having mouthed economic platitudes on screen, the great man opened up once he knew the cameras had stopped rolling. Emu was all a French plot, he said, to knock him off his perch and muscle in on the Bundesbank’s monetary act.
In the event it was Helmut Kohl who did for Karl Otto by imposing unification on terms that outraged the Bundesbank boss. But the Bundesbank had its revenge on the French by insisting that Emu should be underpinned by the least accountable central bank of all time. That is the price Europe must now pay for Deutschmark extinction.
A curious postscript is that the Bundesbank has acquired devaluationist instincts in its twilight months. We have even had an explicit Deutschmark devaluation in the European exchange rate mechanism against the humble Irish punt. No one noticed. It was, of course, described as an Irish revaluation.
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as was pointed out in Prospect’s “Curiosities” column last month, the British are remarkably unchauvinistic about their currency. Who else would put two and a half foreigners on a committee to set interest rates? The fully paid-up foreigners are DeAnne Julius (US) and Willem Buiter (Dutch). The half is Charles Goodhart who is Anglo-American (and uncle of the Prospect editor).
What concerns some Brits is not so much nationality as craft skills and demarcation lines. A very senior ex-Threadneedle Street dignitary recently told me of his deep shock that mere economists had been allowed out of the backrooms to have majority say in monetary policy. His gist was that the monkeys had been put in charge of the zoo.
Meanwhile we have had the governor, Eddie George, a supposed inflation nutter, restraining the hawkish economists. But economists could hardly make a bigger hash than that…