ABSTRACT
One of the clearest inferences which may be drawn from Chapter 1 is the need for a German institution which would contribute to monetary stability. Not only have there been a number of currency crises during the development of the economy, but an important theoretical aspect of the SME entailed the creation of an independent central bank which would control the money supply so as to create a built-in economic stabiliser. In 1948, the western Allies established a central bank in each Land. The policies of these Länder central banks were coordinated at the federal level by the Bank deutscher Länder (BdL). The BdL was given considerable legal autonomy and a substantial degree of operational independence from the later-established Federal government (Hardach 1980:153). Indeed, the BdL had also asserted its domestic independence from Allied influence over interest-rate policy as early as June 1948; on the other hand, the decision by the Bonn cabinet in 1949 to devalue the DM by 25 per cent was overruled by the Allies who invoked a 20 per cent devaluation (Marsh 1992:165). When the more unified Deutsche Bundesbank (BBk) became the new West German central bank in 1958, it confirmed this independent trend. But whereas the BdL had been owned by the Länder central banks, ownership of the BBk passed to the Federal government (ibid.: 19; Paprotzki 1991:207). The BBks profits must have been particularly welcome to the Federal government as its budget deficits rose steeply in 1992–3. In April 1992 the profit transfer was DM 14.5 billion, while in the same month in 1993 it amounted to DM 13 billion (MRDB 5/93:9).
