Healing the rift in Europe’s single currency

FEW POST-WARECBECBECBECB economic institutions have been as successful as the Bundesbank. Its tough stance on inflation in the 1970s ensured that, while the world battled double-digit price rises, those in Germany were relatively contained. Its credibility with the public and markets was so strong that other countries were keen to harness its might, leading to the creation of the single currency in 1999. Jacques Delors, a European politician, once joked not all Germans believe in God, but they all believe in the Bundesbank. Others in Europe were ready converts, ceding monetary sovereignty to the European Central Bank (), which is based in Frankfurt, and was at first heavily influenced by German economic doctrine.The Bundesbank has a distinct role and identity—it represents Europe’s biggest economy at the , runs payments systems, operates in the bond markets and continues to be admired by most Germans. But relations with the have soured, partly as a result of the euro-zone sovereign-debt crisis. After 2011 influence gradually drained away from the Bundesbank and power became concentrated under Mario Draghi, then president of the (see ). His successor, Christine Lagarde, wants a fresh start. Both sides need to make up. If they do not, they risk a botched response to the next recession and a deadly seeping away of German voters’ trust in the euro.