Rede zur Verleihung der Würde eines Ehrendoktors des Fachbereichs Wirtschaftswissenschaften der Johann Wolfgang Goethe-Universität, Frankfurt am Main, am 15. April 1999

Professor Dr. Dr. h.c. mult. Otmar Issing Mitglied des Direktoriums der Europäischen Zentralbank

In seinem Buch "Die Sorge geht über den Fluß" (S. 72) bemerkt Hans Blumenberg: "Das große Rätsel des ausgehenden Jahrtausend ist und wird vielleicht bleiben der wachsende Überdruß an der Wissenschaft". Die hier Anwesenden kann der Philosoph kaum gemeint haben. Ich fühle mich jedenfalls nicht angesprochen. Von Überdruß keine Rede, ungemindert faszinierend die Entwicklung der Wissenschaft mit immer neuen Anregungen.

Wer Entscheidungen zu verantworten hat, kann die Kluft nicht ignorieren. Hier die Wissenschaft, deren unersättliche Neugier immer neue Fragen aufwirft, ewig nach den richtigen Antworten suchend - dort der Zwang der Politik, täglich neu zu handeln, längst bevor die letzte Sicherheit - wenn es sie denn gäbe - gefunden ist. Für welche Aufgabe träfe dies mehr zu als für die, mitzuwirken bei der Schaffung einer neuen Währung, zumal unter den besonderen Bedingungen der Europäischen Währungsunion.

Ich sehe meine Rolle im Versuch, eine Brücke zu schlagen zwischen dem verwirrend reichen Spektrum der Wissenschaft und dem Gebot der Politik, laufend Entscheidungen zu treffen. Von daher mögen Sie verstehen, was es mir bedeutet, von der Universität in dieser Form geehrt zu werden, und dies von einer derart angesehenen Institution wie dem Fachbereich Wirtschaftswissenschaften der Johann Wolfgang Goethe-Universität. Dafür meinen tiefen Dank. Ich freue mich über diese Auszeichnung um so mehr, als Sie bei gleicher Gelegenheit Tommaso Padoa-Schioppa, einem wahren Europäer, die Würde eines Honorarprofessors verleihen, einem Kollegen, mit dem ich mich über den gemeinsamen Einsatz für den Erfolg des Euro hinaus verbunden fühle.

Dem Wunsch der Fakultät entsprechend werde ich die verbleibenden 12 Minuten in englisch sprechen, der Sprache des Euro-Towers:

I must confess that it was extremely difficult for me to select a topic from the wealth of potential subject matter. Every topic runs the risk, once broached, of turning into a lecture, which takes up an entire evening. On the other hand, the ECB is not any more an unknown entity. Taxi drivers no longer take visitors to the wrong address. And I am sure that most of you will already be familiar with our activities not least with our monetary policy strategy.

As the most recently established central bank, the ECB attracted the attention of the whole world from the very outset. There are obvious explanations for this. On 1 January 10 currencies, some of which were far from insignificant at the international level, became one. Thus almost instantaneously a monetary policy institution was born that - in global terms - ranks second only to the US Federal Reserve.

Its currency, the euro, has given rise to high expectations from the right beginning of the Maastricht process. There are two reasons for this.

On the one hand, it was necessary to make it easier for citizens to accept the end of their familiar currencies. Prior to the birth of the euro, surveys showed that its popularity stood in inverse proportion to the stability displayed by the participating currencies in the past. Accordingly, the pledge of a stable euro was emphasised time and time again and with great clarity.

On the other hand, the project of a single currency has always been given a meaning which goes far beyond the purely economic. The idea of the euro acting as a pacesetter along the road to political union has long been entertained by many illustrious proponents. Historically, political borders and currency domains have indeed tended to coincide. Banknotes and coins no doubt represent a visible and tangible symbol of sovereignty, national identity, and even emotional attachment. Explanations for this phenomenon sometimes drift into the realm of the mystical or religious. André Glucksmann once elevated the German predilection for price stability to the status of a "currency religion" (Rheinischer Merkur, 3 September 1993).

In the same vein the Portuguese Prime Minister Guterres is reported to have made the following statement at the summit in Madrid at the end of 1995: "when Jesus Christ decided to found a church, he said to Peter: thou art Peter, and upon this rock I will build my church. You are the euro, and on this new currency, the euro, we will build our new Europe" (Frankfurter Allgemeine Zeitung, 13 December 1995).

You will understand that a central banker may become slightly dizzy at this ideological elevation. We do not see ourselves as the high priests of a currency religion. Fulfilling the expectation of a stable euro is difficult enough in itself and demands absolute commitment, if not devotion, to the task. However, the special constellation of one currency and one market but 11 sovereign states does invite more far-reaching reflections. On the one hand, there are hopes inspired by a European vocation that the euro will exert a unifying and catalytic effect at the political level. On the other hand, there are concerns about the robustness of this historically unprecedented undertaking.

The discrepancy between a single monetary policy and the heterogeneity of the political decision-making process represents a potential for considerable tension, the influence of which, like the two faces of Janus, points in opposite directions. On the one hand, there is the opportunity for the ECB and the euro to help set Europe on a stability-oriented course and thus contribute to further advance down the road of ever-closer integration.

On the other hand lies a minefield of potential conflicts with other actors in the economic policy field. Against a background of high unemployment - around 15 million unemployed in the euro area at the start of Monetary Union - the special challenge for monetary policy was clear from the outset. For politicians, there exists in this context even more than usual, the temptation to offload their responsibility onto the central bank. To this end, the obvious strategy for them, in the first instance, is to emphasise and exaggerate the ability of monetary policy to influence growth and employment at every suitable opportunity.

The second - and related - strategy for politicians to "pass the buck" is offered by the seemingly very convincing concept of co-ordinating the policies of all those responsible for the economy. Do economic models not provide irrefutable proof of an outcome, which is already clear intuitively? If central banks, fiscal policy-makers and both sides of industry bring their actions into line ex ante, the result will be optimal. Acting alone or even in contradiction to the other parties, by contrast, leads to poor outcomes.

The notion of policy co-ordination has, in various forms, again become popular with politicians in recent time. The idea, that separate policies, which affect each other, should take each others' objectives and actions into account appears to be an attractive and self-evident proposition. However, there is a general danger that such an approach dilutes incentives and accountability for individual policy makers. In the extreme, if everybody is regarded as responsible for everything, nobody will take responsibility for anything.

Moreover, the notion of policy co-ordination has in some cases also been used - I should rather say misused - as an all too clever cover for attempts at a more fundamental shift in responsibilities. In fact, in some quarters it has been argued quite openly that wage policy should be geared to secure price stability by ensuring the constancy of unit labour costs. If fiscal policy remains "neutral", monetary policy would then be "free" to promote growth and employment.

Who, then, would be to blame if growth proves to be unsatisfactory and unemployment remains at an unacceptably high level?

This is the appropriate moment, in this place and in this year, to pay the inevitable tribute to Frankfurt's most famous son. In keeping with the season, the quote is taken from Faust's walk with Mephistopheles on Easter Sunday:

"O glücklich, wer noch hoffen kann, Aus diesem Meer des Irrtums aufzutauchen."

I shall try to do so. However, given the time constraints, I shall restrict myself to a few propositions. (You will have to take the word of a doctor rerum politicarum honoris causa that he could well speak for longer - you would, indeed, not wish to imply that the faculty had made a mistake?)

  • The suggested assignment turns whole libraries with theoretical knowledge and empirical experience upside down. The appropriate development of unit labour costs is a precondition for a stability-oriented, conflict-free national monetary policy, but not a substitute.

  • The proposition remains undisputed that inflation is a monetary phenomenon in the longer term. If this basic insight is forgotten, society must sooner or later pay for this error with the loss of price stability.

  • The consequences for the labour market are devastating if wage policy were to be implicitly discharged from its responsibility for employment.

  • Assigning a major responsibility for growth and employment to the central bank places excessive demands on monetary policy. Its most important contribution to an environment in which the economy's growth potential can be exploited consists in maintaining the stability of the value of the currency. Confidence in lasting price stability not least removes inflation risk premia on interest rates, ensures low real interest rates and thus fosters investment, growth and employment.

  • An ex ante co-ordination of policies, as outlined above, results in a blurring of responsibilities and incentives of individual actors to pursue sound policies with respect to their primary objectives.

  • The models of the co-ordination strategy disregard, in general, the political-economy context of practical policy making and therefore an essential element of reality. Academics may be forgiven for such naivety. For central bankers, such behaviour would be worse than negligent. With respect to their designated task, as laid down in the bank's statute, it would be irresponsible to overlook the fact that any commitment to ex ante co-ordination could jeopardise price stability.

Discussions on the role of the ECB's monetary policy are in full flow. Against the background of the appallingly high level of unemployment in Europe, this debate was to be anticipated. Any other expectation would have been unrealistic. However, the key to combating unemployment definitively does not lie with monetary policy. The less those responsible for other policy areas are willing or able to undertake the necessary structural reforms, the greater is the incentive for them to distract attention from their own failures. And then it is only a small step towards making the ECB a convenient scapegoat.

We must take this challenge very seriously. The independence of the ECB as enshrined in the Treaty acts as a shield against direct political influence. In the long run, however, not only the monetary policy of the ECB, but also its Statute must be backed by the continued support of the public at large.

Achieving and maintaining this support is a far from easy task. The evident diversity created by 11 participating Member States makes this task even more difficult. We shall do everything in our power to meet this challenge: by pursuing a stability-oriented policy for the euro and by always striving to inform the public of the reasons for our decision in a clear and transparent manner.

Speaking engagements

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