The economic and monetary relation between Germany and the Netherlands

Abstract

Germany, Europe’s monetary anchor: what could have been more inconceivable just after the Second World War, when the European countries, struggling with colossal overliquidity consequent on the forced financing of Germany’s war efforts, the contraction of the real economic sector and the bilateral balance-of-payments surpluses vis-à-vis Germany, were compelled to undertake currency reforms? Yet Germany became Europe’s monetary anchor, thanks to the vigour of its economic build-up during the 1950s and 1960s, and its monetary authorities’ quest for stability. Thanks also to the collapse of the Bretton Woods system in the early i970s, which created a need for a new anchor for the European exchange rates; the predominance of the German economy made the Deutsche mark the obvious choice.

‘Of Germany’s partners, the Dutch monetary authorities above all appreciate the importance of Germany’s stability-orientedpolicyfor the system. The role of the Deutsche mark as an anchor of stability. Maybe we realize more vividly than the other partners that, in the unlikely event that the Bundesbank could be persuaded to adopt another policy, the system would not be long-lived.’^I