A row over perks for its president has pitched Germany's Bundesbank and the government into open conflict, media said on Thursday, after the central bank resisted pressure to sack its top official. "The hotel affair of Bundesbank President Ernst Welteke has broadened into an open conflict between the Bundesbank and government," Berliner Zeitung newspaper wrote. "A public power struggle has been set alight," said Financial Times Deutschland. The government made thinly-veiled calls for the Bundesbank to sack Welteke after it emerged last weekend that the bank had paid for his luxury hotel costs in Berlin during celebrations to launch euro notes and coins in 2002. But after an eight-hour meeting on Wednesday the Bundesbank board said there were not enough grounds to dismiss him. In a further sign of defiance, the Bundesbank also announced that Vice President Juergen Stark would assume Welteke's duties until the matter was cleared up. Stark is viewed with distrust in Berlin because of his past ties with Germany's conservative opposition.
Handelsblatt said the highly unusual political pressure on the independent central bank had developed into a "scandal within a scandal". However, it said Welteke had lost any claim to the moral high ground. "In a time of budgetary laxity in many European countries one should not underestimate the role of national central banks in providing a moral counterweight to irresponsible government actions," it wrote. "But how strongly the Bundesbank can play this role depends on the qualifications and authority of its president. From that point of view, Welteke was always the wrong man," it wrote. Frankfurter Allgemeine Zeitung said Welteke had done himself lasting damage by deciding not to apologise from the start and to meet the hotel bill in full himself. However, it said the government could also come out badly from the affair. It claimed the government has been considering for a while if Welteke, whose term in office ends in 2007, should step down early to give the government the chance to appoint another Social Democrat to the post before the 2006 general election. "Vested with the standing of an unbiased Bundesbank president, the successor could comment on the economic and financial policies of a conservative-led government," it noted. Tagesspiegel's cartoonist poked fun at the Bundesbank's loss of power to shake markets since the European Central Bank took over the role of setting Europe's benchmark interest rate. It showed a voice emerging from a tiny Bundesbank office block dwarfed by the ECB's skyscraper saying: "Resignation is out of the question: what would financial markets do without me?".///