A Merkel Advisor Goes to Frankfurt What Awaits Weidmann as New Bundesbank Head?
In recent years, Jens Weidmann, the designated new head of Germany's central bank, has been a loyal advisor to German Chancellor Angela Merkel. Now, though, he will have to quickly assert his independence. European monetary policy could hang in the balance.
Jens Weidmann, 42, places great deal of value on style and etiquette. Even when the future president of the Bundesbank showed up to clear out his old office at the Chancellery last Thursday, he was impeccably dressed, his tie was perfectly knotted.
That's how the staff at the Chancellery have always known him: No matter how much pressure he was under, no matter how long the hours, his hair remained neatly parted to the side.
Weidmann served the chancellor for exactly five years. When he started, he was the youngest department head in the German government. Now that he is leaving, he is once again going to be the youngest. In fact, no other Bundesbank president in the central bank's history has been younger.
Where, though, will his future loyalties lie? Will they remain with the chancellor, to whom he owes his position? Or will they be with the Bundesbank, which is struggling to maintain its political independence?
He is assuming his new job at a difficult time, with monetary policy under more pressure than it has been since the introduction of the euro. As part of his new position, Weidmann will take a seat in the European Central Bank's governing council, a body which is no longer merely responsible for guaranteeing the stability of the common currency, but has now also been tasked with saving the European monetary union.
Pragmatic and Flexible
This leads to a dilemma: The ECB jeopardizes its autonomy when it serves as a tool of financial policy. This balancing act between leading an uncompromising fight against inflation, in the German tradition, and pursuing pragmatic crisis management proved to be too much for Weidmann's predecessor, Axel Weber, who resigned earlier this month.
There is no reason to fear that the job will also overwhelm Weidmann. During his tenure in Berlin, the adviser to the chancellor showed himself to be pragmatic and flexible, almost to the point of being unprincipled.
Whether he was brokering a deal for the German government to purchase part of Daimler's stake in the European Aeronautic Defense and Space Company (EADS), or was organizing subsidies to bail out German carmaker Opel, Weidmann has always proved himself to be a loyal, quiet and efficient servant to the chancellor.
In one of his last official acts, he solved a personnel problem for the chancellor, contributed to harmony in the coalition of the conservative Christian Democratic Union (CDU) and the pro-business Free Democrats (FDP), helped close the gender gap and, at the same time, gave a new direction to the human resources policies of the Bundesbank's executive board. Weidmann suggested to Merkel that the position of Bundesbank vice president, which had also become vacant, be filled by Sabine Lautenschläger, the current director of Germany's Federal Financial Supervisory Authority (BaFin).
Merkel and German Finance Minister Wolfgang Schäuble then consulted with FDP head Guido Westerwelle. And ultimately, it was Westerwelle who made the official offer, one which Lautenschläger immediately accepted.
Happy to Help
Weidmann, though, would appear to be the primary beneficiary of the arrangement. He was essentially able to handpick his own deputy, a woman with whom he gets along well. During the financial crisis, if he wanted to know about the condition of a certain bank, he would call Lautenschläger to sound things out -- and she, as Germany's top regulator, was happy to help.
Like Weidmann, Lautenschläger recommended herself for higher office with her competency during the financial crisis. Furthermore, as former BaFin press spokeswoman, she has shown an ability to convey complicated concepts so clearly that even politicians with no expert knowledge of the world of finance can follow.
What, though, will be the pair's effect in Frankfurt? What do the Bundesbank and the ECB stand to gain?
Over the years, a number of top ministry officials have transferred to the Bundesbank. Two of the most prominent currency watchdogs in Germany's recent history, Karl Otto Pöhl and Hans Tietmeyer, served earlier as state secretaries in the Finance Ministry. It is a promotion which often produces an astounding transformation -- referred to as German monetary policy experts as the "spirit of Frankfurt."
Central bankers have to maintain a stable monetary value. That is their main job and no politician is allowed to influence them. Once newcomers realized the degree of their new independence, most central bankers usually quickly drop old constraints and loyalties.
Resistance from the Bundesbank
Some even repress certain elements of their own past. In the Finance Ministry they still like to talk about the transformation of the current ECB chief economist, Jürgen Stark. As the state secretary for finance in the mid-1990s, he came up with a scheme for then-German Finance Minister Theo Waigel that would have allowed the Bundesbank's gold reserves to benefit the government's budget.
The initiative failed due to resistance from the Bundesbank. Years later, when Stark's former colleagues dusted off the old plan, they found themselves on the receiving end of an angry rant from Stark, who was now working for the Bundesbank. How could anybody come up with such a stupid idea, Stark roared.
It seems likely that Weidmann will also cut himself loose from his own past. But it will be more difficult for him than it was for his predecessors. In contrast to many of those before him, Weidmann will make the jump right to the top of the Bundesbank, leaving him little time to feel his way forwards. Furthermore, he will be immediately confronted with his past position. Whereas Weidmann has thus far had no objections to the ECB's purchase of government bonds, for example, his is now taking control of an institution that is adamantly opposed to the practice.
Furthermore, as the chancellor's economic adviser, Weidmann was one of the main architects behind the German government's concept for a European economic government. It is an idea that Weidmann was touting as recently as two weeks ago. The Bundesbank, however, is opposed.
In addition to policy challenges, however, the newcomer from Berlin will face a number of other hurdles. Weidmann will no longer be able to blend into the background, he is no longer a servant of the state, but rather a major player on an equal footing with the chancellor, her ministers and the other powerful heads of central banks in neighboring European countries.
In addition to diplomatic skill, flexibility and precisely parted hair, he will need a quality that he has not yet had to prove he possesses: assertiveness.
Translated from the German by Paul Cohen