... and in Germany, Kohl rallies the troops for battle with Bundesbank battle45 roman over deckys
Monday 02 June 1997
After a flurry of bitter exchanges, Mr Kohl rallied his troops for the battles ahead, expected to culminate a week on Friday in a parliamentary vote on the central bank's gold reserves. The government's plan to raise the book value of the Bundesbank's gold and sink the proceeds into state debts has provoked a rebellion within the coalition parties.
Two MPs have already said they will oppose the bill in parliament, cutting Mr Kohl's majority to three.
To prevent further defections, senior government figures have launched a counter-attack, warning Frankfurt against recruiting allies in parliament.
"I expect the Bundesbank to respect the legislative independence of politics just as politics always respects the independence of the Bundesbank in monetary policy," Theo Waigel, the Finance Minister, said at the weekend.
Wolfgang Schauble, the parliamentary leader of Mr Kohl's Christian Democrats, amplified that message in a letter to his MPs.
"The decision on the question we now face is to be taken by the legislature, whose independence is no less than that of the Bundesbank," Mr Schauble wrote.
The central bank argues, however, that the government's plans violate its own constitutionally enshrined independence. The Bundesbank has publicly deplored the manoeuvre as "interference in the independence of the central bank".
Wilhelm Hankel, a former member of the Bundesbank council, was even more forthright.
"No finance minister since Hitler's time has dared to make such a grab at the central bank as Mr Waigel," he said.
The perception that Mr Kohl's government is perpetrating something undemocratic lies at the heart of the bitter dispute.
The Social Democrats are now backing the Bundesbank, and calling for the government's resignation. Leading economists and some Christian Democrat grandees are also campaigning against the government.
The private banks, naturally, have sided with their colleagues, but industry is pleading for a truce.
And the government has received unexpected support from the white-collar workers' trade union, whose leaders believe that Mr Waigel's accounting trick would save thousands of public-sector jobs.
But all sides are beginning to recognise that an escalation is in no one's interest. The Bundesbank's prophecy that Mr Waigel's plan would undermine public confidence in the currency of today and tomorrow has already been partly fulfilled. The Deutschmark is on the slide and the markets are convinced that the German accounting trick will pave the way for a soft euro.
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