Bundesbank returns to the offensive

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The Independent Online
FRANKFURT (Reuter) - The Bundesbank yesterday denied again that its high interest rates were solely to blame for Europe's recent currency turmoil and said the real fault lay with economic divergences between countries.

The central bank's deputy president, Hans Tietmeyer, also said that market tensions could have been prevented if European nations had played by the rules of the European Monetary System and not refused to realign currencies.

Mr Tietmeyer said the recent turbulence in the EMS had been blamed on German 'arrogance' and 'egotism'. But he maintained that the real reasons for the turbulence lay in the exchange rate structures, 'which have become unrealistic due to economic divergences'.

The recent turmoil had its positive side in that 'a veil had been drawn back and realities laid bare'.

Economic divergences had emerged which could no longer be covered up on a long-term basis. 'Certainly the heavy burden of German monetary policy contributed to the tensions in the EMS, but they were not the decisive cause,' Mr Tietmeyer said.

Noting that the Maastricht treaty provided for the possibility of a two-speed Europe, he remarked: 'The recent excited debate about moving ahead at two speeds is faintly surprising.'

Mr Tietmeyer said he saw no need for the devaluation of the French franc, as France had no great fiscal problems and had fewer problems from wage developments than Germany.

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