NEWSMAKERS
WELTEKE
GOES
It all happened a long time ago - New Year's Eve 2002 to be precise. But
it has given Bundesbank chief Ernst Welteke one big hangover. Two years
on Welteke has bowed to calls to resign after it emerged allegedly from
sources close to the finance ministry - that his €7600 bill at a top Berlin
hotel was footed by Dresdner Bank, a commercial bank that he regulates.
Welteke celebrated New Year and the launch of the euro in the hotel with
his wife, two sons, and one of their girlfriends. Unwisely, he tried initially
to shrug off the idea that he had done anything wrong, saying; "When I
go to Berlin for New Year's, I usually stay for several days."
Welteke paid back the part of the stay that was not deemed to be business
expenditure, and the Bundesbank repaid the rest. However, questions as
to whether Welteke compromised his own independence or that of his institution
still lingered. These are the questions that the Bundesbank Board (minus
their chairman) asked in their seven-hour crisis meeting on Wednesday,
April 14. That meeting resulted in Welteke being asked to step aside.
Welteke acknowledged the "criticism and misunderstandings" but after thinking
about it for three days, gave up the struggle on Friday.
The episode must be seen as part of an ongoing quarrel with the government,
with the finance ministry last week issuing a press release urging Welteke
to resign. This quite rightly prompted accusations from Jürgen Stark,
acting president of the bank, that the government was interfering in central
bank independence. But the rift goes further than this. German opposition
parliamentarians have called for Hans Eichel, finance minister, to be
questioned, over the allegations that he leaked information of the trip
to discredit Welteke, who had been critical of his fiscal policy.
STARK LIKELY
SUCCESSOR?
Many observers of the affair think that his successor will be Koch-Weser,
the ministry of finance official favoured by Hans Eichel. But insiders
say that Jürgen Stark now has a better chance. Koch-Weser's candidacy
has little support among the Bundesbank board, which has to be consulted
by the German government on this appointment. Apart from other considerations,
Koch-Weser has no experience of central banking.
Many observers in Germany continue to believe that this affair is part
of a sustained attack on the independence of the Bundesbank by the ruling
SDP government headed by Gerhard Schröder. The plan was, allegedly, to
force Welteke out of office and put Koch-Weser in, so that he could then
succeed Otmar Issing to the key position on the ECB in 2006, when Issing
has to retire. But this plan has not worked out the way the plotters intended.
PILGRIM
OF STYLE
Antonio Fazio is no stranger to calls to step down as governor of the
Banca D'Italia. And now Fazio has quickly resumed the limelight with a
hospitality scandal all of his own.
Fazio has come under renewed pressure to resign as it emerged that in
2002 he had flown to two Catholic pilgrimage sites in planes rented for
the trips by the chairman of Capitalia, a bank that he regulates. While
traditionally pilgrims trudge humbly to place their devotions at these
holy sites, Fazio landed in style at the French shrine at Lourdes and
the Spanish at Santiago de Compostella.
The trip was widely known of in Italian banking circles, but now it has
become public the bank is facing further government attacks. As in Germany,
it is the finance minister who has been at the forefront of attempts to
dislodge Fazio.
BARKER AND
BEAN REAPPOINTED TO MPC
Kate Barker and Charles Bean are to be reappointed to the Monetary Policy
Committee. Bean, executive director for monetary policy and chief economist
of the Bank of England, and Barker's terms are both due to expire on 31
May 2004. Bean, something of a veteran now, will then embark on his third
term, and Barker on her second..
Gordon Brown, UK Chancellor, said about Barker: "I am delighted that Kate
Barker has agreed to serve a second term on the Monetary Policy Committee.
Her combination of industry, academic and public sector experience is
of great value to the MPC."
Mervyn King, Governor of the Bank of England said Friday "I must also
add how tremendously pleased I am that Kate Barker has agreed to accept
the Chancellor's invitation to serve another term as a member of the Monetary
Policy Committee, and I look forward to working with her for a further
three years".
On a separate matter Sir John Parker has been appointed chairman designate
of the Bank's committee of non-executive directors in succession to Sir
David Cooksey, who will stay on until early next year for a handover period
while Sir John familiarises himself with this role in the oversight of
the Bank's management.
RATO HOLDS
NARROW LEAD AS JOSTLING CONTINUES FOR IMF SLOT
European horse-trading goes on for the new IMF chief. Latest off-stage
bargaining revelations claim Italy withdrew EU competition commissioner
Mario Monti's candidacy for the top slot in return for French and German
support over its deficit problems. The allegation comes from Italian daily
La Repubblica, although the source was not identified.
The daily claims that Italian Finance Minister Giulio Tremonti obtained
assurances from Germany and France that they would block any moves to
start early warning procedures over Italy's budget deficit forecast of
3.2%, if Monti was removed from the runnings.
The "exceptional candidate" that Silvio Berlusconi said he would put forward
for the job last month, is widely thought to have been Monti.
Meanwhile Spanish candidate Rodrigo Rato seems to be pulling into the
lead again after a new compromise brokered by Gordon Brown UK Chancellor.
The compromise is designed to overcome anger at the European monopoly
on the post and subsequent political trading to fill the position. Brown
believes that Rato will be seen as an acceptable candidate by the developing
world due to Spain's close links with the Latin America.
Otherwise the only British contribution has been a rather pathetic plea
for more openness in the IMF appointment process. Whatever the merits
of this proposal, it merely hides the fact that UK governments of all
political complexions have been absolutely useless in terms of securing
such top jobs for British people. They have never seriously tried to take
on the French, Dutch, or Italians in the serious business of international
economic diplomacy, with the result that despite good candidates there
is no chance that a Briton will land the IMF job.
PARAMO PLAYS
FOR ECB BOARD POST
José Manuel González Páramo has been given the go ahead by the Committee
on Economic and Monetary affairs. The committee voted that the European
Parliament endorse his appointment as a member of the executive bard of
the European Central Bank, replacing Eugenio Domingo Solans who steps
down at the end of May. The final decision is then to be taken by the
Heads of State, or Government of the Union, acting unanimously.
Páramo appears to have said all the right things at his appearance in
front of MEPs, expressing firm commitment to the ECB's prime objective
of price stability, stressing his commitment to the stability and growth
pact and voicing the need of for new member states to catch up with the
living standards of existing members.
Páramo has been a member of the governing board of the Bank of Spain since
1994 and a member of the executive board since July 1998.
LIIKANEN
LINED UP TOP POST FINLAND
Erkki Liikanen has been endorsed as new governor of the Finnish central
bank by the Parliamentary Supervisory Council of the Bank of Finland.
The Finnish bank has been searching for a replacement governor since outgoing
governor Matti Vanhala announced his retirement in March.
Liikanen is EU Commissioner for Enterprise and Information Society and
has also served as Finland's finance minister in the late 1980s. Olavi
Ala-Nissilä said that Liikanen was endorsed because of his extensive international
experience and close contacts in relevant interest groups at home.
Tarja Halonen, the President, is expected to make the final decision on
the appointment, possibly as soon as next week.
$1000bn
COST OF CORRUPTION
The cost of corruption worldwide is $1000bn according to a World Bank
Institute study . The trillion-dollar figure is an estimate of actual
bribes paid in a year, says Daniel Kaufmann, the Institute's director
for governance. He also emphasised that the problem affects rich and poor
countries alike and is not just an issue for developing states.
The figure is put into perspective when compared with the estimated size
of the world economy at the time that the data used was collected (2001-2002),
of just over $30 trillion. Furthermore, the $1 trillion figure for corrupt
funds excludes the costs of embezzlement of public funds or theft of public
assets.
The report claimed a country with a per capita income of $2000 could raise
this to $8000 in the long term if it addressed its corruption and improved
its governance and rule of law.
BANK OF
KOREA FRENZIED OVER FILM
Officials at the Bank of Korea are taking no chances as "The Big Swindle"
a domestic film is released. Nervous central bankers quake at the prospect
of viewers imitating the group of conmen that defraud the bank of 5bn
won ($4.37m) in cash with a forged cheque in the film, posing as commercial
bankers.
Hwang Myeong-gwan, head of the Bank of Korea's safety supervisory office
announced, "I have ordered Seoul headquarters and our 16 branches to thoroughly
prepare for the possibility of a crime similar to the one in the movie".
Despite the fact that for the last few years cash has only been provided
to commercial bankers through computer networks, the central bank has
been taking every precaution to make sure the more impressionable audience
members do not try their luck. It has started to tighten controls on visitors
to its offices and armed guards have been installed with in areas where
cash is transported.
The media-shy bank has never before been featured in a film as the victim
of a crime, and immediately turned down the producer's request to film
in the bank's southern Seoul branch. The bank sniffed that it is a facility
with the same security levels as the National Intelligence Service.
"RHYMES
WITH NO REASON"
The Dallas Fed has introduced a special section to its website "Rhymes
with No Reason" listing some of president's Bob McTeer's poems. As well
as prose from the 'lonesome dove' it contains various stories including
how he saved a dog's life. See http://www.dallasfed.org/mcteer/rhyme/index.html
One is a limerick on dollarization:
There once was a hyperactive central banker
Whose boat needed a stronger anchor.
The ocean was big,
The boat was small,
So he tied his anchor to a tanker.
And one on McTeer's heroic flight home from an FOMC meeting:
I barely made my flight home yesterday, but I did make it. After finishing
my Wall Street Journal, I told my seatmate to help himself. He said, "No
thanks, I have to finish this book about dogs. Our dog is old and my wife
wants to have it put down. I don't want to, but I don't know. I thought
reading this book might help me decide." The book's title was Dogs Never
Lie About Love. I didn't catch the author's name.
After about an hour the dog owner turned to me and asked if I'd heard
what the Federal Reserve had done that day. I looked at my watch and saw
that it was 2:45 p.m. I told him what we did and introduced myself. I
also told him it was public by now. He introduced himself as an ob-gyn
at Southwestern Medical School in Dallas. He went back to his dog book
and I reviewed the Dallas Fed's 1999 budget. It's tight, you know.
As we were landing, I asked my new friend if I could have a vote on the
dog. He said I could. I said, "Let it live." He said that made it two
to one.
"This poetry writing is something that I do for fun, way out on the fringes,"
McTeer told Reuters.
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