The German government rejected accusations by the acting head of the Bundesbank yesterday that it had violated the central bank's independence by putting pressure on Mr Ernst Welteke, its president, to resign following a hospitality scandal.
Mr Jürgen Stark, standing in for Mr Welteke, who took leave of absence this week, said: "The comments and expectations issued by Berlin at regular intervals can be seen as interfering with the Bundesbank's independence and proper functioning."
Mr Welteke found himself in the line of fire when it emerged that Dresdner Bank, one of Germany's biggest commercial banks, had paid a €7,661 hotel bill for him and his family two years ago at a ceremony in Berlin.
After damaging the Bundesbank's reputation for high moral authority, the scandal could now hurt the government, as Mr Stark's comments suggest the Schröder administration was seeking influence over the politically independent bank.
The government had declined to give Mr Welteke support when the Dresdner revelations first broke, then in effect demanded he resign after the Bundesbank decision to allow him temporary leave.
"We do not find ourselves in a normal situation," Mr Stark said. "We are having enormous problems getting back to serious work." Thomas Steg, government spokesman, said yesterday: "We have no supervisory authority over the Bundesbank. But we nominate four of its seven board members and the president. We made the position of the government clear, which is that we expected the board to clarify this situation as fast as possible."
The government is understood to have agreed on Wednesday to put forward Mr Caio Koch-Weser, deputy finance minister, as successor to Mr Welteke should the latter resign.
But officials in Berlin were shocked by Mr Welteke's decision on that evening to take leave of absence at the urging of the board. This gave him the chance to resume his position if an inquiry by the Frankfurt state prosecutor failed to establish he had done anything wrong. Mr Welteke, although a member of Chancellor Gerhard Schröder's Social Democratic party, has had a tense relationship with the government.
Mr Schröder praised the Bundesbank in a speech to parliament last month for its decision to sell some of its gold reserves to fund education projects. But the bank and the finance ministry are thought to differ about whether the proceeds should be invested directly or put in a trust.
The nomination of Mr Koch-Weser, who still stands to succeed Mr Welteke should the latter step down, would put a loyal ally of the chancellor at the top of the central bank.
It would also prevent the opposition Christian Democratic Union from naming a friendly candidate if it won the 2006 general election. - (Financial Times Service)
