ECB Turns 10
Would you believe it? It's already 10 years, since Riverdance power-danced the new bank for Europe through its inauguration at Frankfurt's venerated old opera, with great fanfare, festive speeches and "Ode to Joy", Europe's national anthem.
And ten years ago it was by no means certain that we would ever celebrate a tenth birthday for the ECB or its (then) not yet launched currency, the Euro. Remember?
Well, I certainly do. Because - unlike many of the younger of the forex traders, analysts and general currency handlers out there - I DO remember the time BE (Before Euro) and the Deutschmark, Franc and Lira. And as we were shooting for our special program "The ECB - the first ten years", rummaging through archive material and old interviews, meeting the makers and shakers of European monetary policy reminisce with us about how it all started ... it all came back: The drama, the anxiety, the prophecies of doom and failure. The protests and rage of citizens who loathed to give up their national currencies.
The other day, I had sat down with Otmar Issing, the chief architect of European monetary policy as we know it. Mr. Two Pillar - the man who gave the ECB the twin policy stance of inflation and monetary targeting.
Now - as elderly folk do - I must go back a bit. Because Otmar and I (not that we are actually on first name basis ... hahaha ... but I am sure he won't mind), we do go back quite a while. The first time I met him was in 1990 or thereabouts, when he had just been appointed chief economist to the Bundesbank, Germany's then powerful central bank.
We met at a Bundesbank luncheon and I asked him a (no doubt stupid) question about monetary targeting. Well ... He came fresh from Würzburg University, where he was very popular with his students. And I quickly learned why. Because he immediately launched into a private lecture, merrily scribbling away on paper napkins ... And, let's put it this way: At least from my part, it was "love" at first sight. Because, low and behold, I actually understood what he was trying to tell me.
Over the years, I have had many occasions to interview Prof. Issing, and I can safely say that I always learned something.
So I was very pleased when he agreed to talk to me for our ECB anniversary special to take a trip down memory lane, to tell me how he remembered those turbulent, momentous first days of European monetary policy.
"There were times", he remembers, "when you came home after a long day's work and it suddenly sank in. You suddenly thought – 'My God! What are you doing here? THIS is going to affect the whole of Europe, 320 million people!'" (Watch the ITV on our web site and/or in the program!)
And another thing we both remembered: How many had predicted total and utter disaster. This new currency for Europe, this EURO, with no track-record and 11 different national interests to tear at it ... it would get slaughtered in the markets. Its freshly inaugurated central bank, this "baby of a central bank", as Issing called it, would have to scramble for cover to avoid being gunned down in the barrage of the first day or days trading.
Well, guess what? Didn't happen. The ECB still stands - in more ways than one. Its currency, ten years down the road, is world reserve currency number two. In fact, even today, in some ways, reserve currency number one! Since the rapid appreciation of the Euro against the Dollar, this "new kid of the block" has long surpassed the greenback (in 2006, in fact) in terms of total value of currency in circulation. There are more euro-denominated bonds in the world than dollar ones.
And, apart from the 15 countries - we started with 11, remember? - that are part of the Euro zone, it's the official currency of five other countries, the UN official currency of six more and ten currencies have been pegged to the euro.
So, whatever the doubts and criticism, it looks very much as if the euro were here to stay. And so is the ECB. I, for one, am jolly glad ... Not only, because it guarantees my job ... ;-)
Because if you got used to crisscrossing through the better part of Europe without passport controls and without having to change currencies at every corner - well, then you do see the benefits only too clearly.
What about the future? What about those - like Denmark or the UK - who chose NOT to join the Eurozone? I leave you with a quote from a Briton, a former member of the Bank of England policy-making council, the MPC, no less. "They'll all join", says Willem Buiter, afore-mentioned former MPC member. "First Denmark, then Sweden and then there are three that aren't even in the European Union yet. Norway, Switzerland and Iceland. Of those, Iceland will undoubtedly come first because they have discovered what it's like to try and have an international banking system when you have a country the size of Coventry in terms of population. It's not to be recommended. But... they will all be sucked in basically, because it makes too much economic sense."
Quite. That doesn't mean it's going to be safe sailing. For a central bank and its currency it never is.
In any case: Happy birthday, ECB!
Oh, and when Otmar Issing's book about the Euro "Der Euro. Geburt – Erfolg – Zukunft" gets published in English in autumn, do read it. I promise, you shall learn a thing or two.
Needless to say, I've got my (German) copy, signed by the man himself!
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