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Business

Bundesbank's Welteke Takes Leave of Absence

Bundesbank President Ernst Welteke was told to take a leave of absence by the central bank's board late Wednesday, ending days of speculation he would be forced to resign for accepting a free stay at a luxury hotel.

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Few believe Welteke will be returning to the Bundesbank.

The Bundesbank's executive board said in a written statement that Welteke would follow its recommendation and suspend his duties effective immediately. But the board said it did not find reason enough to demand his resignation.

Welteke, Germany's highest-paid public official and the country's representative at the European Central Bank, has been heavily criticized for spending four nights with his family in Berlin's luxurious Adlon hotel during celebrations of the euro's notes and coins launch on January 1, 2002 at the invitation of the Dresdner Bank.

Bundesbank Vice President Jürgen Stark will take over Welteke's job and will participate in deliberations on monetary policy for the euro zone at the ECB. The decision to put Welteke on leave comes amid a legal probe into the affair and increasing media hostility toward the once well-respected head of the German central bank.

The hotel scandal first came to light when newsmagazine Der Spiegel reported over the weekend that Welteke had ignored potential conflicts of interest, given that the Bundesbank is partly responsible for regulating the German banking sector. For the stay in Berlin, the Dresdner Bank picked up the €7,600 ($9,200) hotel bill.

Many Germans were incensed by the matter, since Welteke earns €350,000 a year. Mixing business with pleasure, the central banker confirmed that he, his wife and their three-year-old son, as well as his 25-year-old son and his son's girlfriend, had stayed at the hotel. In an attempt to make amends, he has paid for two nights of the stay himself, while the Bundesbank has covered the days Welteke undertook work-related duties during the trip.

Government for resignation

Members of the ruling Social Democratic party, of which Welteke is a member, have made little secret of the fact they think he should resign over the affair. German Finance Minister Hans Eichel said it was up to the Bundesbank, which enjoys considerable independence under German law, to review the case, but added that the conduct would have been unacceptable if Welteke had been a government minister.

On Wednesday, a government spokesman also indirectly said that resignation might be the right thing to do. "It's understandable and appropriate if Welteke publicly asks himself whether he can expose his family, himself, his office and the institution of the Bundesbank to further public debate," Thomas Steg told reporters.

Caio K. Koch-Weser

Caio Koch-Weser: The next president of the Bundesbank?

Now that it looks like Welteke's days are numbered, speculation has increased about who Berlin would pick to take the helm of the Bundesbank. Although Vice President Stark is well regarded as a central banker, he has ties to the conservative opposition. A more likely candidate is Deputy Finance Minister Caio Koch-Weser.

Koch-Weser has plenty of international financial experience from his years at the finance ministry and his time at the World Bank in Washington. He was nominated by Germany to take over the International Monetary Fund in 2000, but his candidacy was vetoed by the U.S. government at the time, saying the post should go to someone with a higher profile.

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