POEHL LOOKS SET FOR EIGHT MORE YEARS AT BUNDESBANK
For currency dealers Karl Otto Poehl is
the scourge of speculators, for bankers he is the man who has
played a key role in shaping the world's financial destiny for
the last seven years, and for Germans he is the guardian of the
mark.
    President of the powerful and independent West German
central bank, the Bundesbank, Poehl is likely to have his
contract renewed for another eight years when it expires at the
end of this year, government officials say.
    (Index of economic spotlights, see page ECRA)
    But no official announcement has yet been made, raising
eyebrows in West Germany's business community.
    The ebullient Poehl spent seven years in Bonn in top
ministerial posts under the Social Democrats, now in
opposition, before he moved to the Bundesbank.
    There has been speculation that Chancellor Helmut Kohl
would try to replace Poehl with a man closer to his own
Christian Democrats. But officials noted that Poehl has worked
closely and successfully with Finance Minister Gerhard
Stoltenberg since Kohl's government took office in 1982.
    Poehl, the most senior central banker apart from Paul
Volcker of the United States, enjoys a strong international
reputation which it would take a newcomer years to build up.
    Given these circumstances, Kohl will probably overlook
Poehl's past as an adviser to former Social Democrat Chancellor
Willy Brandt, and top aide to Helmut Schmidt when he was
Finance Minister, bankers said. It was Schmidt who, as
Chancellor, appointed Poehl to his present job in 1980.
    In recent months, with the mark's strong rise against the
dollar, Poehl has made exchange rates the central concern of
the Bundesbank's council, a highly conservative institution
which has doggedly pursued monetary policies to prevent
inflation catching hold. Older Germans can remember two bouts
of galloping inflation this century.
    But with consumer prices falling for much of 1986, and
inflation negligible so far this year, Poehl thinks it is safe
to relax the monetary reins a little and concentrate on the
dangers to the German economy of a bloated exchange rate.
    "I am of the opinion that efforts to stabilise the
dollar/mark rate have reached a high priority, also for the
Bundesbank, because a further massive revaluation of the mark
would endanger the economy in West Germany," he told business
journalists in Frankfurt recently.
    Ute Geipel, head of research at Citibank AG, says that
Poehl's reappointment would guarantee flexible monetary policy.
    "Poehl's policy has always been a policy which does not
focus so rigidly on domestic factors, but also on the external
economy," she said.
    An economist at a German bank, who declined to be
identified, said "If Poehl is confirmed in his post, it will
certainly be a plus for the pragmatic course which is not so
rigidly oriented towards money supply."
    One of Poehl's great struggles recently has been to
persuade the United States to stop "talking down" the dollar. For
Poehl, the significance of the February Louvre Accord was that
the United States agreed to join efforts to stabilise
currencies.
    The Louvre Accord was greeted with scepticism by currency
dealers who said they would soon put it to the test. But in
fact the dollar has been relatively stable since the pact.
    "This is because the markets know - or perhaps because they
don't know - what the central banks can do," Poehl says of
intervention in currency markets which can quickly turn rates
round, making a speculator's position worthless.
    Poehl was born in 1929 and worked as a financial journalist
in the 1960s before starting his ministerial career.
    A relaxed sun-tanned figure who enjoys cracking jokes over
a glass of beer, he is hardly a stereotype central banker.
    He is also a keen sportsman who likes to watch football and
play golf.
    Poehl says currency market intervention cannot substitute
for correct economic policies if exchange rates are imbalanced.
    "But you can achieve an enormous effect with a small amount
if you strike at the right moment," he said. Bundesbank dealers
are very professional and skilled. "They've burnt the fingers of
many people," he said. And unlike the speculators, Poehl notes,
the Bundesbank dealers usually make a profit.
 REUTER
