Welteke's actions could putBundesbank's reputation at risk

7th April 2004, Comments 0 comments

7 April 2004, FRANKFURT - Once it stood as the bastion of the German mark. The German Bundesbank was a word to reckon with abroad - and the institution itself was a power to reckon with. But the affair over a hotel bill has thrown Germany's highest financial institution into the biggest crisis of its existence. At stake is not only the career of a longtime Social Democratic politician, Bundesbank President Ernst Welteke, but also the credibility and independence that a central bank must have. Politicial le


7 April 2004

FRANKFURT - Once it stood as the bastion of the German mark. The German Bundesbank was a word to reckon with abroad - and the institution itself was a power to reckon with.

But the affair over a hotel bill has thrown Germany's highest financial institution into the biggest crisis of its existence.

At stake is not only the career of a longtime Social Democratic politician, Bundesbank President Ernst Welteke, but also the credibility and independence that a central bank must have.

Politicial leaders and economists in Germany have been taken aback by the speed with which this affair has taken on a life of its own.

Only days ago the one-time Hessian state finance minister was known as he was the epitome of Bundesbank leadership - an independent spirit known for clear but restrained admonitions to the politicians.

In recent years the Bundesbank had lost prestige to the European Central Bank (ECB), but it has not become meaningless in any way. That point was made clear recently in the national discussion over its meagre profits and planned sale of some of its gold reserves.

While the government in Berlin would prefer to use those gold reserves to fill its federal budget deficit, Welteke favoured an educational and scientific fund.

But 61-year-old Welteke will not be able to go after such lofty dreams any more.

Instead of apologising immediately for a luxury stint at Berlin's posh Adlon Hotel for himself and his family paid for by Dresdner Bank, Welteke issued two statements which side-stepped the issue of error on his part.

And that, despite the ECB code of honour which he has vowed to uphold and which bars him from even the appearance of a conflict of interests.

"How can he now admonish the federal government for violating the rules of the European Union stability pack when he himself has violated the rules of conduct for central bank officers," Germany's financial newspaper Boersen-Zeitung wrote Tuesday.

Whatever happens next, the Bundesbank's reputation has been tarnished.

DPA

Subject: German news

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