Germany 'seeking to devalue euro'
By Andrew Gimson in Frankfurt and Toby Helm, EU Correspondent in Brussels
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FEARS are growing in Germany that the new government is working to get the euro devalued before the currency has even been launched, abandoning the nation's traditional role of chief European bastion against inflation.
Leading Frankfurt bankers said yesterday that the demands from Oskar Lafontaine, the German finance minister, for Europe's central banks to cut interest rates and concentrate on creating jobs instead of fighting inflation will undermine trust in the currency.
Ulrich Ramm, chief economist at Commerzbank, suggested that Mr Lafontaine "perhaps has the hidden idea of helping the German economy by devaluing against the dollar" and said if this was the minister's strategy it was likely to fail.
Norbert Walter, chief economist at Deutsche Bank, said Mr Lafontaine's calls for lower interest rates could precipitate a flight from government stocks in the euro area as investors start to fear that the new currency will prove less stable than the national currencies it is set to replace in 58 days.
The Germans are still struggling to understand what Mr Lafontaine can possibly mean by attacking the Bundesbank, whose immunity from political interference and deep-seated horror of inflation are meant to be carried forward by the European Central Bank (ECB). The Bundesbank argues that German interest rates are already at a historic low and any further cut would mean other members of the euro which still need to reduce their rates to the common level set by the ECB would have even further to go before Jan 1.
Wim Duisenberg, president of the European Central Bank, last night rejected all Mr Lafontaine's demands and said he had no intention of yielding to political pressure from any quarter. The ECB was setting up a special committee to act as a "central early warning point" for any problems that crop up over the long weekend from Dec 31 to Jan 4, when the euro will be introduced.
The European Commission condemned Mr Lafontaine's attempts to pressurise the Bundesbank into lowering interest rates. The Commission, which acts as "guardian" of the Maastricht Treaty, said political interference was unacceptable.
A spokesman for Yves-Thibault de Silguy, the Commissioner for monetary affairs, said: "There is no question of any instructions being given to the central bank with regard to its monetary policy, nor is it up to the central banks to accept such instructions, whether they be from a minister, the government or the EU institutions."
The future independence of the European Central Bank, which is supposed to be modelled on the strictly apolitical Bundesbank, was "a very clear issue", he said.
Ingo Friedrich, co-chairman of Germany's opposition CSU group in the European Parliament, said Mr Lafontaine was breaking rules on the independence of central banks laid down in the treaty. He asked Jacques Santer, the Commission President, to investigate.
telegraph.co.uk |
