ernst welteke : europe and the euro - an insider ’ s view ernst welteke, president of the deutsche bundesbank, at the arthur burns memorial lecture at the american council on germany in new york on 18 april 2000. * * * preface it is a privilege and an honour for me to hold this arthur burns memorial lecture. i am very happy to be able to add my name to the list of such distinguished speakers as karl otto pohl, alfred herrhausen, alan greenspan, kurt biedenkopf, hans tietmeyer and rolf e breuer. it gives me an opportunity to pay tribute not only to a high - grade economist but also to an elder statesman who did a great deal to foster us - german relations. when arthur burns was appointed chairman of the board of governors of the federal reserve system in 1970, he already had an impressive academic career behind him, and the status of a first - class international expert on economics. richard nixon, one of five us presidents for whom arthur burns acted as advisor, expressed his high opinion of him in these words : “ shortly after he joined my cabinet in 1969, he demonstrated why i was right in selecting him as my first white house counselor. at our first meeting in the oval office, he explained his role. he said : “ mr president, most advisors tell a president what he wants to hear. i believe it is the responsibility of an advisor to tell you what you need to hear. ” he never failed to meet this standard. ” the ability always to say and do what he thought essential likewise characterised his term of office as central bank governor. the incidental conditions for that office could hardly have been more difficult. the collapse of the bretton woods exchange rate system, the global oil crisis and recession, accompanied by strong inflationary pressures. but arthur burns set to work resolutely and persuasively ; he made it clear that central banks could not be expected to bear the entire burden of fighting inflation on their own. without the support of other policy areas, after all, a monetary policy geared to price stability soon encounters its limits. incidentally, this perception is just as true today as it was then. finally, arthur burns made an invaluable contribution to us - german relations during the four years when he served as us ambassador to germany. in 1985 he expressed his love affair with germany in these words : “ i ’ ve fallen in love with germany ; that ’ s

the european union at their summit in lisbon, where they set the new strategic objective of making the union the most competitive and dynamic knowledge - based economic area in the world. admittedly, general declarations of intent alone have never made anyone more competitive. in a comparative study, the oecd comes to the conclusion that the share of knowledge - based industries in germany is similar to that in the united states at over 50 %. germany ’ s highest growth in investment is in software. and, for creating a knowledge - based economy, it is undoubtedly a significant factor that the labour force in germany is generally highly qualified. that makes it easier to adopt new technologies. iv that takes me on to the question of whether the opportunities on offer are also actually being used. i do indeed have the impression that the necessary restructuring of the european economy is under way. the changes are perhaps most clearly visible in the financial markets, where europe is currently being confronted with a massive surge of initial public offerings on the stock market. more than 200 new innovative enterprises are now listed on the neuer markt and investment in venture capital in germany rose by dm 5 billion in 1999. a lot is happening at the moment on the mergers and acquisitions front. the process of concentration is going beyond national frontiers and traditional market segments, and is helping to open up the global market. operational efficiency is being enhanced. costs are falling. and resources can be saved at the macroeconomic level as well. since the mid - 1990s, when german industry ran into competitive difficulties due to the exchange rate, internal reforms have been taking place in german enterprises - in some cases, accompanied by a considerable number of redundancies. i firmly believe that german industry is now highly productive and competitive. what is sometimes also underestimated abroad is the extent of reforms in the public sector, for example, in germany. certainly, there is still a lot that can be done in that area. but what is occasionally overlooked is that large - scale privatisations of telecommunications, postal services, the electricity industry and the railways have taken place or are planned, and that industry is using the opportunities which this presents. v things are also moving in the field of fiscal policy - including in germany. the deficit ratio has been falling since 1997 - not least owing to the convergence criteria stipulated by the maastricht treaty. even though the public finance situation is less than ideal when measured against the objectives of the stability and growth pact, notable progress has still