Marsh on Monday: As euro implodes, Europe needs more leaders like Hans Tietmeyer
At the start of what could be a bruising year for Europe and the euro, Germany will need men like Hans Tietmeyer. The longtime German finance ministry and Bundesbank denizen, who died last week aged 85, was a veteran negotiator who cut his teeth in the 1980s in trans-Atlantic monetary bargaining on the dollar and Deutsche mark with the likes of Don Regan, Beryl Sprinkel, David Mulford, Jim Baker and Nicholas Brady.
They were all Treasury stalwarts during years of acute dollar fluctuations under President Ronald Regan. Dollar swings — and the abrasive currency diplomacy of the Reagan era — may return under Donald Trump and his nominated Treasury secretary Steven Mnuchin, in view of widespread expectations that the greenback will for the time being extend its winning streak against other major world currencies but will inevitably decline late, just as it did under Reagan, as sobriety sets in on Trumpian economic policies.
Tietmeyer’s 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 EURUSD, -0.0961% , 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.
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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.
Tietmeyer foresaw all the economic and political strains befalling Europe’s monetary union, but was unable to implement the safety mechanisms to prevent them happening.
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 in 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 disagreement with Kohl over German reunification. He died in December 2014, also aged 85.
Tietmeyer was at the center of successive economic flash points. They ranged from forging 1980s currency accords with 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 approach to governmental parleying. 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.
Tietmeyer once aspired to become a priest like two of his brothers. He brought theological fervor 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 1991 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 stubbornly insisted that the independent Bundesbank should become the model for the future European central bank. Kohl could use Tietmeyer’s fundamentalism as a crucial lever to force through German positions on the euro. But neither man’s efforts were sufficient to protect the new currency from inborn contradictions.
Tietmeyer believed, in best German economic tradition, that monetary union should eventually “crown” a long journey of economic harmonization 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 a monetary without a 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.