Newly Appointed Bundesbank Chief Faces Mark-Less Role

A Buba chief with no German mark to focus on? With the euro's near-term future uncertain, Welteke still has his hands full.
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If you haven't heard of

Ernst Welteke

, don't feel bad.

Welteke on Wednesday was appointed to replace his charismatic boss,

Hans Tietmeyer

, as the next president of the

Bundesbank

. Even Welteke's appointment -- which will make him Germany's sole voice at the

ECB

-- was overshadowed by the resignation of U.S.

Treasury

Secretary

Robert Rubin

and the dismissal of Russian Prime Minister

Yevgeny Primakov

.

But the 56-year-old central banker will take on his new responsibilities as the euro's once-unquestioned future looks less certain. That will force Welteke to champion the new currency's resemblance to the mark as opposed to the Italian lira -- not the given some might suspect.

On the surface, Welteke, currently the head of the regional branch of the Bundesbank in Hesse state, is distinctly different from his predecessor. Welteke is a long-time member of the ruling

Social Democratic

party. He has a reputation for being affable and collegial.

Unlike Tietmeyer, Welteke isn't an international figure. While he is close to new Finance Minister

Hans Eichel

and has strong domestic political ties, he may find it hard to assert himself in the international forum Europe's central bank is by necessity.

Welteke also has Tietmeyer's legacy to deal with. Before the 11 nations chose to create Europe's single currency, Tietmeyer was the elder statesman of Continental central banking. Indeed, much of Europe would merely shadow the interest-rate moves of the Bundesbank. Tietmeyer also spoke for the

Group of Ten

nations after their monthly meetings at the

Bank for International Settlements

and laid the groundwork for the newly formed

Financial Stability Forum

, aimed at increasing transparency and cooperation throughout the international financial system.

A Hawkish Dove?

Still, Welteke is a political insider who has served as economy and finance minister in the past. He is a close friend of Eichel, a relationship that bodes well for cooperation between the Bundesbank and the government. That will be a welcome change from the acrimony shared by Tietmeyer and interventionist former Finance Minster

Oskar Lafontaine

.

That cooperative spirit is evidenced in his past pronouncements that monetary policy should support government goals when possible.

He is seen as more likely to use interest rates to boost the economy than Tietmeyer, who was fixated on containing inflation and the strength of the mark, analysts say. But political necessity may force him to move to the middle.

"Although formerly regarded as more dovish, he has adopted the normal, more centrist central banker style in his comments

ever since it became clearer he would become the candidate to succeed Tietmeyer," says Marco Kramer, an economist for

Banque Paribas

in Frankfurt.

Welteke is already making his mark on the ECB, even though he doesn't take his new position until Sept. 1. He is expected to urge a comprehensive overhaul of both the Bundesbank and the

European System of Central Banks

. In January he suggested allotting various countries specific specialties and responsibilities.

"The organizational principles of the Bundesbank are still oriented on

German state borders, while our duties no longer are," Welteke explained. As for the national central banks, he suggested the possibility of "the Austrians

focusing on Eastern Europe and the Bundesbank on the international financial markets. Does every central bank have to analyze everything?"

Maybe not. And while his appointment may have been obscured by the other big events of the day, Welteke may yet have his day in the spotlight.