Podcast: In The Room
Lex Hoogduin: "He was definitely not amused"
© Gold Republic 2022
On 1 June, the EU’s newest institution - the European Central Bank - will celebrate its 25th birthday. Its teenage years were so traumatic - packing in a global financial and debt crisis, a viral pandemic, and a war between commodity superpowers - that it's easy to forget the central bank’s first uncertain steps.
In 1991, European leaders agreed on when and how to create a common currency, mandated a central bank to manage it, and established its legal boundaries. Two years later, they settled on Frankfurt as the central bank’s headquarters. And, two years after that - woefully short of inspiration1 - they named their currency the euro. And that was it. The architecture, engineering and construction had to be done by a specialist team of monetary economists, market-operations mechanics, and financial lawyers using a temporary vehicle: the European Monetary Institute (EMI). In mid-1998, the EMI turned into the ECB and the euro was launched six months later.
The man who led the transition from the EMI into the ECB and ran the central bank from 1998 until 2003 was Wim Duisenberg. His right-hand man was Lex Hoogduin - the first counsellor to the first president and a pivotal figure in the ECB’s first days. In this episode of In The Room, we talk about the house that Wim built, how its mandate was defined, how it chose to communicate with financial markets, about working with “giants” like Otmar Issing and Tommaso Padoa-Schioppa, and how - in Hoogduin’s view - the ECB has strayed in the years since.
But first, we discuss how this nearly didn’t happen at all after Jean-Claude Trichet challenged Duisenberg for the presidency and, once he failed, how the French lobbied the Dutchman to pre-commit to quitting halfway through his term. “It must have been in ‘97 or early 1998, I recall that Wim Duisenberg told me that Trichet had told him that he will become a candidate,” says Hoogduin. “Duisenberg … I don't think he used the word ‘betrayed’ or something like that but he was definitely not amused … He asked Trichet why he had accepted to be a candidate … ‘Well’, [Trichet] said, ‘if the President of the République asks you something, you cannot refuse it’. And that was basically it. The rest was a discussion between the politicians culminating in that famous weekend in Brussels … In the morning, I congratulated [Duisenberg] on his appointment and … he told me that he had never had such a bad experience.”
To hear Lex Hoogduin’s recollections of the ECB’s birth and his critique of its adulthood, click on your preferred podcast app link and subscribe (free) to the In The Room podcast series. Please also rate and review the series on your app.
In The Room is a series of conversations with officials who played crucial roles in the history of the EU - often but not always behind the scenes.
Edited and produced by davidstudio.
As a reporter, I was at the Madrid EU summit where the name was chosen but didn’t learn the in-the-room story until Gabriel Milési published Le Roman de l'euro (chapter 3) in 1998. Given the opportunity to pick a historically resonant name - écu, florin, franken, livre, mark, shilling, or thaler (the origin of dollar) - heads of state and government opted for a bland prefix. Not even a word. Why? Because, reports Milési, Helmut Kohl (Germany) thought his people couldn’t accept a “devalued currency” like the écu. Because Felipe González (Spain) thought franken sounded like “Franco”. Because florin had the misfortune of being suggested by an opter-out (John Major or Ken Clarke - UK) with the support of a second-tier prime minister (Wim Kok - Netherlands). González, as the summit’s chairman, concluded that enough time had been wasted, and that “all the opinion polls show that people like euro”. No one in the room did but neither did anyone hate it enough to wield a veto. And so meh was born.