Mr Duisenberg's speech at the 11th Frankfurt International Banking Evening
Speech by the President of the European Central Bank, Dr W F Duisenberg at the 11th
Frankfurt International Banking Evening in Frankfurt on 20 May 1999.
It is indeed an honour for me to have been invited to say a few words here this evening at the
Frankfurt International Banking Evening. At the same time, it is more than a challenge and a
rather daunting task. Speaking after Hans Tietmeyer is almost like preaching after the pope.
Moreover, I believe it is well known by now that the members of the Governing Council of
the ECB speak with one voice. So, what does that leave me to say?
Some have taken this principle of "speaking with one voice" to mean that there would only be
one spokesperson for the ECB. That is a misunderstanding. Each of the members of the
Governing Council of the ECB has a voice and makes use of it. It is essential for the decisions
and views of the Governing Council to be explained comprehensively throughout the euro
area as well as outside it and multiple expression is one way to do it. This is particularly so in
these early years following the introduction of the euro. After I had given a speech in German,
Theo Waigel once observed, "The euro speaks German." He was right, of course, but the euro
actually speaks the languages of all the other countries in the Eurosystem. We speak with one
voice but, if need be, in eleven languages. This evening we are speaking English, although
Hans quoted an advertisement in Dutch in which I appear. I shall presently also speak two
sentences in German. Incidentally, Hans could also have referred to another advertisement in
which a puppet - according to some people, a President of the ECB look-alike - is doing some
basic arithmetic. He calculates that if 1 euro is 2 guilders and 20 cents then 2 euro are 4
guilders and 40 cents. At the ECB our sums are rather more complicated than that, but Hans
rightly argued that central bankers cannot be replaced by computers. Neither should the
second advertisement be taken as an argument for replacing central bankers by puppets,
especially not with their strings being pulled by Ministers of Finance.
We, the members of the Governing Council of the ECB, speak with one voice, but not all
voices are identical. How can they be, since they belong to different individuals? We are not
in the business of producing clones. Earlier this evening we once again had the privilege of
listening to a convincing and clearly audible voice. There is nothing in what was said with
which I disagree, and I intend to add very little to it. In fact, on some matters I can only repeat
what was said in my own words. Don't worry, I shall not do this extensively. However,
repetition is the mother of all genuine knowledge. I cannot therefore resist the temptation to
focus briefly on two points that Hans made. The principle of conducting monetary policy
within a longer-term framework and from a longer-term perspective is the first issue that I
should like to address. This principle sounds simple and its logic is indeed not complicated. It
is, however, as difficult to adhere to it in practice as its logic is simple. It seems to me that it
has even become more difficult to apply in recent decades as a result of the rapid development
in information and communication technology. Tonight is not the occasion to elaborate on this
at length, but perhaps you will allow me to share the following reflections with you.
Developments in these areas have brought great benefits and have the potential to lead to
significant additional welfare gains in the years ahead, not least in Europe. At the same time
they present challenges to economic policy-makers, since they have already fundamentally
changed the character of society and its economies. These changes are ongoing and we are
only beginning to come to terms with them. The word which characterises much of today's
lifestyle is "zapping". The equivalent of "zapping" in monetary policy terms is adopting an
activist policy, with over-eager responses to all the items of daily information in the financial
markets. I sometimes have the impression that activism is experiencing a revival in some
circles, although the past has demonstrated clearly how ill-advised we would be to follow
such policies. Hans Tietmeyer has time and again stressed the importance of taking a
longerterm view. He has also pointed out - although this is perhaps less known - that economies do
not operate in isolation. Historical developments and the wider social and cultural
environment should be taken into account. Short-termism is also the name of the game being
played by some commentators who, barely five months after the introduction of the euro, are
drawing far-reaching conclusions about the success of the euro or, more spectacular, its
failure. From a longer-term perspective, one can appreciate, for example, that the current
situation of price stability is a great improvement on the situation in many countries in recent
decades. Making the euro a lasting success is of course an ongoing process and indeed, in line
with the title of Hans' speech, "a permanent challenge and task". This task requires the input
of many persons, firms and institutions. Of course, the Eurosystem is not the least important
in this respect.
This brings me to the second point made by Hans on which I should like to focus. That is that,
in the end, even the most independent central bank cannot guarantee the maintenance of price
stability if no real support for this objective is given by fiscal policies, politicians, social
partners, good academic analysis, the financial community as present here this evening and
the public at large. Although, technically speaking, an independent central bank is able to
maintain price stability in the medium term, in the longer term the actual outcome would be
radically different without the existence of what Hans would call an entrenched stability
culture. The importance of this cannot be overstated here in Europe, where we have just
introduced a new currency in eleven countries with different histories, cultures and
backgrounds. Establishing and maintaining a European culture of stability is of the utmost
importance. This also explains why central bankers regularly express their views on other
policies, be it fiscal policies or structural reforms. I have done so in the past and shall continue
to do so in the future - as always, on a constructive basis and in recognition of the fact that the
central bank does not decide on these policies, but only gives its advice. The German
authorities have received a great deal of advice from Hans over the past six years. Perhaps
they did not always like his advice - for instance when they wanted to revalue the stock of
gold - but I am sure that they were not surprised that he gave it. They would have been really
surprised, however, if the President of the Deutsche Bundesbank had not expressed his views.
To help to establish and maintain a culture of stability is also one of the reasons why a central
bank needs to be open and communicative. We at the ECB attach great importance to this
principle and are making every effort to practise it. We are prepared to learn from experience
and to adjust our line of thinking wherever and whenever it proves necessary.
Only the pope is infallible - central bankers are not. Communication should not be
unidirectional. We are willing to listen to others and to exchange information and views with
them, while at the same time bearing in mind our own spheres of responsibility and those of
others. Finally, I should like to mention the importance of a serious, well-informed and
constructively critical press in this communication process. For the communication process to
function well we need to provide the press with sufficient information, clearly conveying our
views to its representatives. It also calls for journalists who are prepared to really digest this
information, not just to "zap" through it in search of an eye-catching headline; they also need
to study the sometimes technical background of central banking. A particular group of
journalists awards the prize of European central banker of the year. Perhaps it would be a
good idea to award a prize to the best European financial journalist of the year. Let me make
myself clear, I should not want to be involved in the organisation of such a competition, nor
even to have a vote in selecting the winner. I have to admit, though, that I would be interested
in the outcome.
Tonight Hans Tietmeyer has addressed the Frankfurt International Banking Evening for the
last time in his capacity as President of the Deutsche Bundesbank. Hans, I know that it is not
over yet. However, August is drawing closer and closer. You have now entered the phase in
which you are doing things for the last time in your present capacity. Recently, you visited De
Nederlandsche Bank. It was probably your last visit, but, surprisingly, it was also your first. I
say surprisingly, because as President of the Deutsche Bundesbank you represented the
Deutsche Mark, which, as we in the Netherlands used to say, was for fifteen years pegged so
successfully to the guilder.
Tonight is not the occasion to say farewell to you. Nor am I the person to make the farewell
speech that you deserve. In this group of financial experts there is no need to go over your
impressive career with all its highlights; they are well known. Let me just simply mention
some of the facts: almost six years as President of the Bundesbank, your unique role in the
German unification process, your key role in the establishment of EMU from the very
beginning (in fact, you were a member of the Werner group in the early days of planning
economic and monetary union) and your role on the international scene, not least but certainly
not only in the central banking community. Germany, Europe and the world know you as a
determined, uncompromising and convincing teacher of the necessity and merits of
stabilityoriented policies. What you had and have to say was perhaps often predictable, but more often
than not your saying it lent it weight and inspired confidence. Moreover, what you once aptly
"Man kann schöne Sonntagsreden halten. Die Entscheidungen fallen
said is absolutely true:
an Werktagen." You are known to be a hard worker - some would even say a workaholic
and you have tremendous "Ausdauer".
You never get tired of putting your analysis and convictions across, as has again been
demonstrated tonight. We owe you a great deal of gratitude. After August we central bankers
will miss you as a colleague, although I believe we have internalised your basic principles.
They will therefore still be around as if you are still present yourself. And should we tend to
forget them, I am sure that Ernst Welteke will help me to remind other colleagues of them.
Sometimes, I wish that we could do the same as they do in the world of sport in the United
States. There, when an outstanding player retires, in order to honour him the number he wears
on the back of his shirt is never again used by another player. Central bankers do not wear
shirts with numbers on the back, but if we did, I am sure that we would withdraw your
number. Retirement is the natural end of one's career, but it should not be overdramatised.
People do matter - and you have certainly shown that - but institutions generally outlast them.
In fact, that is what many people work for. Luckily, I am convinced that this is the case in
central banking. So, the institutions that you have worked to build will go on. Meanwhile, as I
look ahead to August, I know that while I will lose a colleague, I will still have the same
friend. I know that is true for many of us here this evening. I should therefore like to close by
simply expressing my thanks for your support over the years both as a colleague and a friend.