Germans refute EMU charge

IS THE German Bundesbank trying to sabotage monetary union to protect its own power? That was the charge from some quarters last week, as British attempts to rescue sterling were undermined by the remarks of a member of the German central bank's council. The pound was sent tumbling despite heavy UK intervention.

In a release of a planned speech, Professor Reimut Jochimsen, a Bundesbank council member from North Rhine-Westphalia, argued that the potential for a realignment of currencies within the exchange rate mechanism 'had been repressed for many years for prestige reasons.' The markets saw this as a call for weaker currencies, such as sterling, to devalue against the mark.

The remarks provided grist for a growing number of Bundesbank critics, such as the German magazine Der Spiegel, who think it is getting too big for its boots. They say it is trying to provoke a realignment of European currencies to scupper moves towards European monetary union, when it would lose its unique role.

Some of its hawkish council members - notably Lothar Mueller from Bavaria - certainly think EMU is a French plot to undermine the mark. It is no secret that the Bundesbank council is not keen on the timetable for introducing EMU and would like a revaluation of the mark.

But the idea that the independent Bundesbank would undermine the Bonn government is dismissed by European central bankers, who think the Jochimsen episode was a cock-up, not a conspiracy. Immediately after the speech was released, the Bundesbank denied it wanted a realignment. Professor Jochimsen, moreover, was not one of the hawks favouring a rise in the German Lombard rate last month, which would have put intense pressure on several European currencies.