Karl Otto Poehl, Bundesbank Chief for Reunification, DiesDavid Henry
Karl Otto Poehl, the Bundesbank president who managed the introduction of the deutsche mark in East Germany before reunification in 1990 and helped lay the foundations for Europe’s common currency, has died. He was 85.
Poehl died on Dec. 9, the Frankfurt-based Bundesbank said in a statement on its website today. No other details were given.
The onetime journalist upheld the stable money traditions of West Germany’s central bank throughout his tenure from 1980 to 1991. During Helmut Schmidt’s time as West German chancellor, Poehl battled accelerating inflation of more than 6 percent before Schmidt was removed in a vote of no confidence in 1982. Re-establishing price stability when Helmut Kohl took office, he predicted the inflation that East Germany’s adoption of the deutsche mark in July 1990 would cause as the country moved toward reunification three months later.
Poehl “delivered proof that price stability and growth, even in a period of great monetary-policy challenges, are not opposites but rather that price stability provides the basis for sustainable growth,” Bundesbank President Jens Weidmann said in the statement.
Poehl’s Bundesbank clashed with Schmidt, who described its interest-rate policy as “very dangerous” to economic growth, according to a 1981 article in Spiegel magazine.
The Bundesbank cut its main discount rate from 7 percent, at the time of Schmidt’s departure, to 2.5 percent by the end of 1987, when consumer prices were rising about 1 percent. A tightening bias was restored as German reunification loomed, and the discount rate stood at 6.5 percent when Poehl stepped down, replaced by Vice President Helmut Schlesinger.
“Inflation is like toothpaste,” Poehl said in a 1980 interview with Institutional Investor magazine. “Once it’s out, you can hardly get it back in again. So the best thing is not to squeeze too hard on the tube.”
A Social Democrat appointed by Schmidt, Poehl was credited with giving West Germany the lowest inflation rate of any industrialized nation during his tenure, according to a 1990 article in the New York Times. Initially a reluctant participant in German monetary union, Poehl presided over a central bank that was often criticized by the U.S. and French governments for failing to stimulate global economic growth, it said.
“If today there were such a thing as a delectable, international contest for the lowest inflation rate, then you, Mr. Poehl, would be the promoter of this new Olympic discipline,” Bundesbank Vice President Johann Wilhelm Gaddum said in a speech in August 1991.
In 1988, Poehl was a member of the pan-European committee set up to study economic and monetary union, with European Commission President Jacques Delors as chairman. Poehl and central-bank governors in Europe submitted the so-called Delors Report in April the following year, defining the objectives of monetary union, which included the possible replacement of national currencies with a single European one.
In 2001, he warned of the consequences that divergent national policies would have for the European project.
“In the long-term, economic and monetary union will exert pressure to develop a common policy,” he said in an interview with Germany’s Manager Magazin. “Let’s take fiscal policy. Without an element of coordination, it’s inevitable that tensions will arise in the common market.”
Poehl was born on Dec. 1, 1929, in Hanover, Germany. He completed an economics degree in 1955 before heading the publishing department of the Munich-based Ifo Institute for Economic Research until 1960, according to a Bundesbank profile.
After working as a journalist specializing in economics for six years in Bonn, the West German capital, Poehl was an undersecretary in the Finance Ministry from 1972 to 1977. He then became the Bundesbank’s vice president.
Poehl had two children from his first marriage and two from his second, according to Deutsche Presse-Agentur.