Prof. Tietmeyer expresses his praise for Dr. Duisenberg as the committed
champion of stability Text of the laudatory address by the President of the Deutsche
Bundesbank, Prof. Hans Tietmeyer, in honour of Dr. W.F. Duisenberg, President of the
Netherlands Bank and of the Bank for International Settlements, on the occasion of the award of
the prize for the "European Banker of the Year 1996" by the Group of 20+1 in Frankfurt on
3/3/97.
I
Being elected in Frankfurt is something rather special. I am not thinking so much
of yesterday's local elections. After all, for centuries Frankfurt was the venue of the election of
the German King, and later on of the Holy Roman Emperor. Today, however, we are concerned
not with the Emperor, but with the European Banker of the Year. And the votes were cast not by
the seven princely Electors, but by the 21 margraves of the international economic press.
By electing Wim Duisenberg as European Banker of the Year, the Group of 20+1
landed a triple coup.
-They honoured the individual: Duisenberg, the committed champion of
stability.
-They honoured the institution: The Netherlands Bank, that stronghold of
stability.
-And they honoured the nation. The Netherlands is today, in a sense, the
model country - the shining example on the continent.
II
While others were still moaning about the flood of economic challenges, the
Dutch were already starting to come to terms with them. They weeded out their social system.
They increased the flexibility of their labour market; they encouraged part-time working,
widened wage differentials, seized the opportunities presented by the services sector.
To be sure, even the Netherlands still has some problems to contend with. But the
adjustments are already paying off. Unemployment is falling. Employment is rising. And despite
the difficult environment (and, by the way, also despite almost identical exchange rate
movements to ours), economic growth has turned out to be exceptionally resilient.
The long-standing traditions of the Dutch are obviously still intact. After all, as
seafarers and merchants, they have been obliged for centuries to satisfy the requirements of
foreign markets. That is why today they are a good distance ahead of other countries in the
adjustment process.
I know, of course, that many of the Dutch are not very fond of eulogies of their
success. Too much praise from outside might impede the domestic reform process. And we
know very well that even long-standing "model pupils" have to take care to see that their marks
remain good. But I believe the Dutch are sufficiently self-assured to be able to cope with praise,
too.
It is the ability to adjust flexibly that determines "the ascent and decline of
nations", and thus their currencies as well. The example of the Netherlands, in particular, shows
that an internally and externally hard currency helps to create jobs. Admittedly, the political will
to effect domestic adjustments, and the social consensus that they should be carried out, are also
essential.
The erstwhile pegging of the guilder to the D-Mark has long since given way to
coexistence on equal terms. Nowadays it is not unfair to ask whether the guilder has not
meanwhile itself become the new anchor currency in Europe. In a sense it has, at any rate jointly
with the D-Mark.
There are two reasons why the Netherlands has been able to assume this role of
the guilder as the "co-anchor" in the ERM:
-First of all, an economic reason: the markets see that the Dutch are not
dependent on importing their stability through the exchange rate link.
Their "stability culture" stands firmly on its own feet.
-And secondly, a political reason: the Netherlands has played a crucial part
in ensuring that the ERM exists at all in its present shape.
This is because a critical situation arose in the summer of 1993, under the impact
of upheavals in the ERM. In the monetary "summer gales" of those days, it was suggested at
times that Germany should be relegated to the status of a spectator. But the Dutch refused to
unpeg the guilder from the D-Mark. And the other member states then felt that the ERM was of
no particular interest without those two.
The unambiguous stance of Dutch economic and monetary policy is paying
dividends. Today Dutch interest rates are below German rates, at both the short and the long end
of the market, despite the slight increase in the last few days. Whether De Nederlandsche Bank
is already the actual "interest-rate leader" in Europe is a question I would rather leave open.
True, we at the Bundesbank know that we cannot, and do not wish to, permit ourselves any signs
of laxity. But for the time being we do not think that the turning point for an upward interest rate
adjustment lies with us. The Dutch success up to now has not been achieved overnight. It is the
upshot of a long and consistent road which Wim Duisenberg has done a great deal to shape.
III
Wim Duisenberg comes from Friesland. What is puzzling is how he comes by the
name of Duisen-berg. As you know, Friesland is so flat that you only need to stand on a
newspaper to be able to overlook the entire countryside.
Frisians are supposed to be very attached to their native locality, which is by no
means the same thing as being "provincial". And they are said to be, above all, indomitable,
which the uninitiated sometimes interpret as "self-willed". But that doesn't matter. As you will
know, such a characterisation is not entirely unknown for a Westphalian, either. That is hardly
surprising. After all, our birth-places are only 120 kilometres apart.
There were signs of Wim Duisenberg's international vocation at an early age. As
a student he was particularly interested in international economic relations. He wrote his doctoral
dissertation on the topic: "The economic consequences of disarmament". And he worked for the
International Monetary Fund for five years.
But then he responded to the call of his homeland. There was nowhere he was not
needed. Economic research needed him. He became a professor of macroeconomics in
Amsterdam. The government needed him. He became the Minister of Finance at an early age.
Actually, that's a contradiction in terms. Youth, after all, tends to be idealistic and impetuous,
whereas age tends rather to be distrustful and wary. And a finance minister needs to be highly
distrustful and wary. The banking industry needed him. He joined a commercial bank. And
finally the central bank needed him. He became its Governor, which elicited from him the
following comment: "It's the best job ... The pity is that there's only one such job per country."
Well, being Central Bank Governor in the Netherlands is a longer-term
occupation. Anyway, I don't know any other country that has had only three Governors in the
past fifty years. His spell as Governor did not begin very auspiciously. Against his advice, the
guilder was devalued against the D-Mark as part of the major realignment within the ERM in
1983. That was due less to economic calculation than to a political oversight. And at that time
the youthful Governor was unable to get his way in all respects vis-à-vis the politicians. But the
markets were resentful for a long while afterwards. In the course of the 1980s, however, the
markets' confidence was regained. And Wim Duisenberg played a major role in that, too.
Wim Duisenberg's professional life has meanwhile come full circle. The
Dutchman who was always interested in the world at large has held a number of important
international offices. For instance, he is now, for the second time, Chairman of the Board of the
BIS in Basle. He is also the incoming EMI President; specifically, in Frankfurt. (I know he
would have been only too glad to be EMI President in Amsterdam. But there his chances would
certainly have been lower.) The newspaper Börsenzeitung wrote: "The new lion-tamer for the
EMI". And that would seem to make him the obvious candidate for the office of the future
President of the European Central Bank.
IV
The boat of European monetary policy needs a shrewd and experienced captain.
But, Wim, beware of the song of the sirens. In Europe, as you know, there is an island. There,
some observers are loudly singing the praises of a specific financial culture which is claimed to
be the only culture for the future. But that culture differs in some respects from continental
financial culture. All I can say on that score is: Wim, stay on the continent!
Continental (or should I say: German) financial culture is not as out-dated as
some people make out. Long-termism is not to be equated with immobility or lack of flexibility.
To be sure, the continent needs more flexibility - in the area of social security and on the labour
market alike. But our financial sector is already flexible. After all, we do not want to mix up
flexibility with volatility. It may well be the case that short-termism sometimes makes asset
prices "more flexible".
But what matters is the financial sector's capacity to come to terms with changed
requirements in the economy. Long- termism is certainly no obstacle to that. Long-termism
makes the seas less rough. That helps the central bank to stay on course and set the sails
properly. And one day the European Central Bank will have to do just that. The expectations
pinned on the courage and navigational skill of the future ECB Governing Council are high.
But I am quite sure that, with you as Captain, the ECB crew will manage to
manoeuvre the euro to an anchorage in the safe haven of monetary stability. In Germany the
politicians are vowing that the euro will be as stable as the D-Mark has been. Actually, the
guilder ought to be the reference point. For I can tell you: the German people will accept the
euro only if it is every bit as stable as the guilder. The fact that there has long been a virtual
monetary union between our two countries owes much to you. What we envisage is just such a
stable monetary union on a larger scale.
I am sure that that is your objective, too. We Governors of the other central banks
will give you every assistance when you assume the presidency of the EMI in a few months'
time. I am convinced that you will prove a worthy successor to Alexandre Lamfalussy. And he,
after all, has set a high standard.
Wim, my good friend, I should like to congratulate you sincerely and cordially on
having been elected European Banker of the Year 1996. Seen from the Frankfurt perspective, all
I can add is: Frankfurt is such an interesting and attractive city that I would wish that you may
remain here for longer than some 18 months, not only as European Banker of the Year 1996, but
as central banker of Europe.