ECB shoots itself in the foot

Date: 23/07/1998

THE shock revelation by European Central Bank President Wim Duisenberg that he is well-paid speaks volumes for the way the new institution has conducted business since its inception - and even before.

As the avuncular Dutchman himself confessed: “This is no state secret.” So why did the ECB treat it as one?

How many people will begrudge paying the man at whose desk the monetary policy buck will stop once the single currency is launched a little more than European Commission President Jacques Santer receives and less than he was getting in his previous job as governor of the Dutch central bank?

While some are bound to seize upon this as an golden opportunity to revive the age-old arguments about 'over-paid' Eurocrats, most would acknowledge that his is an extremely important job and the salary attached to it must be rewarding enough to attract a high calibre of candidates in future.

The unnecessary fuss over the salaries of the six-member executive board is symptomatic of the pointlessly opaque public relations policy of the bank in its early days.

At first, staff even refused to confirm that a committee had been set up to look into salary structures or say who was on it. The low rate of Euro-tax withheld from ECB wage packets was characterised as a German tax, and - until the European Parliament actually put the question straight to the man himself - the amounts themselves were kept secret on the grounds that these people were, unlike Commissioners, EU-salaried staff.

It was the same story when controversy erupted over the transparency of the ECB's decision-making. In public, Duisenberg and his five colleagues repeated the mantra that minutes of meetings could not be released for 16 years, spoke in vague terms about being “open” to Parliament and allowed the impression to grow that they were going to be as secretive as the most furtive of continental European central banks.

Yet officials had already decided to release detailed summaries of decisions following meetings of the governing councils, monthly reports on macroeconomic developments which would drop hints about the next move in interest rates and quarterly bulletins, and to hold regular meetings with the Parliament.

If the bank is going to be relatively transparent - which it is - then why not just come out and say it? Monetary policy is like a parachute: it only works when it is open.