The Euro-Politics of the Deutsche Bundesbank

Developments and Perspectives

Abstract

The Deutsche Bundesbank has argued that the euro can have economic and social advantages only when the stability-oriented policy take the highest priority. ECB inherited this principle from the Bundesbank. Up to now ECB has succeeded in maintaining price stability. In addition, the real GDP growth is recovering after the end of 1998. The issue of the euro-dominated securities has incresed rapidly since the introduction of the euro.
But the economic developments in 1999 have problems to solve. First, the recovery of industrial production is largely supported by the exports to the outside of the euro area. The weakening of the euro contributed to this increase of the exports. Therefore the recovery in 1999 doesn't necessarily reflect the structual improvements. Second, the euro-dominated securities issued in 1999 are mostly bought by the institutional investors in the euro area. In this sense the internationalisation of the euro is still developing. Third, from the ECB's view the weakening of the euro have nothing to do with the structual problems. But the Bundesbank admits that the structual problems have effected the euro exchange rate. This fact indicates the difference of the exchange rate policies among the centralbanks in the Eurosystem.