Relations between the Bundesbank and the Federal Government

In a nutshell, the relationship between the Deutsche Bundesbank and the Federal Government is characterised by the fact that the Bundesbank, in exercising its monetary powers, is independent of instructions from the Federal Government, but is required to support the Federal Government’s general economic policy, without prejudice to the performance of its priority functions. This relationship between the government and the central bank served as a model when the framework for European monetary union was drafted; one of the main points on which the members of the European Community agreed when drawing up the framework for monetary union and the ESCB in the Maastricht Treaty was that the ECB and the national central banks should be independent of instructions from Community organisations and institutions, and from governments or other bodies of the member states. For the German representatives the independence of the future ECBS and the commitment to price stability as an overriding priority was an indispensable component of European monetary union. Overall, major characteristics of the German central banking constitution are to be found in the Maastricht Treaty and, in particular, in the Statute of the European System of Central Banks. I should like to provide a more detailed description of the relationship between the Deutsche Bundesbank and the Federal Government under the following headings.