After 11 years as head of the Bundesbank, Germany’s central bank, Pohl still doesn’t fit the mold of the buttoned-down banker. No gray flannel suits and briefcases here. Can you imagine Federal Reserve chairman Alan Greenspan discussing fiscal policy on a TV talk show–then staying on to chat with a fellow guest who happened to be a sex expert? Karl Otto Pohl did just that.
But don’t be deceived: this man is Europe’s most powerful monetary statesman. As guardian of the Deutsche mark, the anchor of the European Monetary System, Pohl’s influence extends far beyond Germany. His post as chairman of the Council of European Community Central Bankers makes him a chief architect of the European Monetary Union–the man who must persuade Europeans to stop thinking in terms of sterling, guilders and drachmas and stuff the alien-sounding “European Currency Unit” into their wallets instead. Little wonder London’s Economist dubbed him “Karl Otto Bismarck.”
Experts agree that the 61-year-old Pohl has done a remarkable job. Despite the boom produced by unification, Germany’s inflation rate remains 3 percent, the lowest in any leading economy. “We have the strongest real growth of any industrialized country,” Pohl says. “Germany is acting as the growth locomotive for the rest of the world.”
Pohl’s chief challenge for 1991 is to keep the train from slowing down. The Bonn government’s deficit, bloated by the cost of rebuilding the shattered economy of what until October was East Germany, is expected to reach a staggering 150 billion marks–about 5 percent of Germany’s gross domestic product (roughly the same as in the United States). Bonn’s insatiable demand for capital is driving up interest rates throughout the European Community, at a time when less-robust, recession-threatened economies such as Britain’s can hardly afford it. Already, Germany’s neighbors are grumbling about having to bear the cost of German unification. Bonn’s excessive borrowing also has made them aware of the perils of developing a single European Community currency and monetary policy under German dominance.
Pohl can’t be blamed for Germany’s lax fiscal policies. When Chancellor Helmut Kohl stunned the Bundesbank and his own government last February by proposing a currency union with East Germany, Pohl took the unprecedented step of warning publicly that extending the Deutsche mark to the East was a “political decision for which the government must bear responsibility.” The dispute highlighted the Bundesbank’s autonomy: unlike other European central banks, the Bundesbank conducts monetary policy independently of the government. Pohl’s outspokenness plays well with inflation-wary Germans. Insists Pohl: “I am accountable first and foremost to the public.”
Pohl has taken pains to preserve the Bundesbank’s independence. He insists that whatever European institution supplants it and the Community’s other central banks be similarly free from political influence. “It would be stupid to substitute a good system with a worse one,” he says. If he succeeds in keeping Germany’s impressive record of price stability intact, Pohl may yet get the rest of Europe to agree.
