Frankfurt – Given the powers the European Central Bank (ECB) has taken for itself through its 20 years, it’s easy to forget that it only got off the ground due to a compromise.
And not just any compromise. As European leaders fought to form the bank, it was clear that a German or a French bank head could cause waves. That cleared the way for Dutch central banker Wim Duisenberg to take the job when it was created.
The original compromise
The compromises have only become more difficult as the years have gone by and the zone has expanded to 19 countries. While southern Europe hailed the cheap-money policy of the ECB after the 2008-2009 financial crisis, the bank must again and again justify its various special measures to sceptical Germans.
The original compromise has also wobbled. After Duisenberg, a Frenchman – Jean-Claude Trichet – took the job, after the French successfully argued that since the ECB was in Frankfurt, a French national should get the top job there.
After him came the current office holder, Mario Draghi, an Italian.
A push to get a German into the top job
And now there’s a push to get a German into the top job, regardless of the concerns this might cause in the less austerity-prone parts of Europe.
Markus Soeder of the conservative Christian Social Union (CSU) and now premier of the state of Bavaria, demanded back in 2016 “more German handwriting” in the ECB’s actions.
Meanwhile, in a more recent appraisal, analysts at the UBS Bank concluded that “Germany’s weight in the ECB council is, in view of the ‘one person, one vote’ rule, too low.”
Hopes are now great that Bundesbank President Jens Weidmann will take over from Draghi at the helm of the ECB in the fall of 2019, so that, for the first time, a person from Europe’s largest economy will be in charge of one of the most influential posts in Europe.
A common central bank
Amid the fusses over leadership, the achievements of one of the most significant projects in Europe’s economic history can be overlooked: A common central bank, which in turn meant a common responsibility for a stable currency in the eurozone.
Duisenberg – who with the launch of the single euro currency on January 1, 1999 became the supreme guardian of the money of more than 300 million people in 11 countries – made it clear from the start what the huge new institution’s primary goal would be: Winning the trust of people who wanted a currency just as stable as their marks, francs, and guilders had been.
“The euro is their currency and they should be able to rely on it maintaining its value,” he declared.
The immense task which lay before the poker-faced Dutchman was described by former Wall Street Journal writer Matt Marshall in his book “The Bank” (1991): “Duisenberg’s biggest challenge is to steer the ECB’s policies through this minefield of national interests.”
The ECB will do everything to rescue the euro
The array of powers that the office carries was dramatically shown by Draghi in the summer of 2012. “The ECB will do everything to rescue the euro,” the Italian banker said: “Whatever it takes.”
Even his critics acknowledge that Draghi’s simple vow stabilized the eurozone during the worst crisis of its young history, at a time when the politicians were slow-footed coming up with solutions.
But that doesn’t mean the approach wasn’t without controversy.
“If the ECB keeps on, then it will soon be buying up old bicycles and in turn issuing new paper money,” was one sarcastic comment in the summer of 2011 by Frank Schaeffler, a financial policy specialist for Germany’s pro-business Free Democrats.
It’s true that the ECB, in its battle against Europe’s minimal inflation and trying to revive a weak economy, has broken some taboos. That, in turn, makes some Germans yearn for the stern stability culture of the Deutsche Bundesbank. People with savings feel they have been dispossessed, even while on the other side, those buying real estate are profiting from the low borrowing rates.
At the same time, a battle is now going on in court about whether the ECB, which is not democratically elected, has overstepped its powers under Draghi’s leadership.
Nor is its relationship with the average person always smooth.
what has gone well and what not so well
In 2015 it moved out of the Eurotower in central Frankfurt to a new glass skyscraper in the eastern part of Germany’s banking metropolis. At its opening in March 2015, masked protesters attacked police, set cars ablaze and hurled stones in an action called by the anti-capitalist “Blockupy” movement.
Future Bundesbank executive Burkhard Balz, of the centre-right Christian Democratic Union (CDU), told the business daily Handelsblatt in January that, “nearly 20 years since the ECB’s founding the time has come for taking stock about what has gone well and what not so well.”