Photographer: Daniel Roland/AFP via Getty Images

Vienna Violins Show ECB How Asset Buying Is Music to the Ear

Updated on
  • Austrian central bank has instruments on its balance sheet
  • ECB meets to discuss stimulus program in Vienna on Thursday

European Central Bank policy makers meeting in Vienna this week have the chance to experience just how unconventional an asset purchase can be.

After discussing their expanded 1.7 trillion-euro ($1.9 trillion) bond-buying plan, Governing Council members will be treated to a performance featuring the Austrian central bank’s most extraordinary balance-sheet items: violins, violas and cellos built by masters such as Antonio Stradivari and Giuseppe Guarneri del Gesu. For central bankers under attack from euro-skeptics, the resonance of the event may run deeper than just the music.

“The Austrian central bank is an important institution supporting the state,” said Governor Ewald Nowotny. “But we’re not just a bank; we also have responsibility for the country."

The concert marks the 200th anniversary of the Austrian monetary authority, or OeNB, in a handy historical reminder of Europe’s tumultuous past as popular discontent rises again. It’s a theme ECB President Mario Draghi may have in mind on Thursday, when he’ll likely repeat his institution’s increasingly urgent refrain that governments must use the time bought by monetary stimulus to reform the region’s economy.

Oh Vienna

The OeNB started acquiring antique string instruments in 1989. Its collection of 29 violins, 3 violas and 6 cellos is among the largest in Europe -- and appropriate for an institution that counts Ludwig van Beethoven among its early shareholders. The German composer, one of the fathers of the Viennese Classic school of music, is on an 1819 register of owners.

Violin from 1698. Credit: OeNB via Bloomberg

Stradivarius Violin Owned by Austria's Central Bank.

Source: OeNB

Just like the public and private-sector bonds the central bank is buying in the name of monetary policy, the instruments are registered on its balance sheet -- as “mobile material assets.”

Means Nothing

Their estimated value exceeds 70 million euros, or about twice the purchase price, according to Elisabeth Dutz, who is responsible for the collection. That paper profit is meaningless though because the institution isn’t planning to sell, she said in an interview. Quite the opposite -- it’s looking to add a violin or cello. The instruments are lent to talented musicians.

“Our intention is to make a sustained contribution to Austria’s music landscape,” Dutz said. “Musicians need good instruments to prevail on the international stage, and particularly the young ones often aren’t able to afford such instruments.”

One prominent recipient is the Vienna Philharmonic Orchestra, which will perform the specially commissioned Symphony No. 2 by Thomas Larcher on Friday afternoon, and which Governing Council members are invited to attend.

The piece, subtitled Kenotaph, comes with a political message. Composed as hundreds of thousands of refugees flee to Europe, it “expresses grief for those who have died and outrage at the contempt for human lives expressed in Austria and other countries,” said Larcher.

That wave of refugees has combined with high unemployment and a long-lasting economic malaise to contribute to the rise of populist parties opposed to European integration. While politicians often blame the ECB, the central bank says governments are slacking.

The Organisation for Economic Cooperation and Development added its voice to the critique of rich-world governments on Wednesday, saying they have failed to revive demand or overhaul their economies. Its highly critical semi-annual report said too much of the burden of lifting growth has been left to central banks.

Shrunken Power

Europe’s political discord, while far smaller in scale at the moment, has echoes of previous social upheavals that have repeatedly highlighted the continent’s internal tensions.

The OeNB has seen plenty of drama. It was founded in 1816 when Vienna was at the political heart of a Europe that was rebuilding after a quarter of a century of wars and the defeat of Napoleonic France. It grew with the Austro-Hungarian Empire, with a staff that peaked at more than 3,600 and which oversaw an early attempt at monetary union. Celebrity architect Leopold Bauer designed almost 20 versions of a planned palatial headquarters.

What followed instead was four decades of European wars and economic turmoil. The site of the palace become the Ostarrichi park, with the shrunken OeNB housed in what was meant to be a building for printing banknotes. That’s where the Governing Council will gather this week.

After the meeting, Draghi will hold a press conference at the Hofburg Palace, then a speech at city hall honoring the OeNB’s two centuries of existence. Both are opportunities to warn -- as his colleagues are increasingly doing -- that governments are putting Europe’s future at risk by failing to tackle its deficiencies. That might not sound as sweet as a 200-year-old violin, but it could be a crucial message.

— With assistance by Katie Linsell

(Updates with OECD report in 12th paragraph.)
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