Germany Puts Imprint on Monetary Treaty
THE new treaty on European economic and monetary union has Germany written all over it.Most noticeable is the German stamp on the future European Central Bank, which is an essential part of monetary union. The European Central Bank, as described in the treaty, will be a near replica of Germany's powerful Bundesbank - adopting its principles, structure, and administration. Like the Bundesbank, the European Central Bank will be independent and not linked to government. In the European Com- munity (EC), only Germany and the Netherlands have truly in-dependent central banks. Like the Bundesbank, its primary goal will be price stability; its enemy, inflation. And like the Bundesbank its structure will be federal, with the governor of each country's member bank having a vote in the bank's governing council. Germany was also the driving force in establishing the economic criteria nations must meet before they are eligible to adopt a single, European currency. (See box at right.) The criteria set limits on member states' inflation, interest rates, and government debt and deficits. With the strongest currency in the EC, Germany does not want to trade its deutsche mark for a currency weakened by poorly performing economies. Ironically, Germany does not now meet all the criteria. It fails the deficit test because of spending on east Germany. But Johannes Scheube, spokesman for the Finance Ministry, says Germany is only "temporarily off course." What gives Germany the ability to dominate the look of Europe's future monetary system is that its economy and currency have been the most strong and stable, economists here say. Monetary union "was not about arbitrarily picking a system to use as a model for the 12," says Hans-Peter Frohlich, economist at the Institut der Deutschen Wirtschaft, an economics institute in Cologne. For the last decade, he says, several European countries have been trying to emulate the German system simply because it is so successful. The French, for instance, began to attack inflation with a tighter monetary policy (as the Germans do) instead of devaluing the franc - and dropped inflation below Germany's rate.