Germany's Powerful Central Bank Heads for Its Demise

After a rule spanning much of Europe's post-World War II history, the Bundesbank's reign is coming to an end.

Germany's fiercely independent central bank is due to begin dismantling its operations next year before shutting down entirely ahead of the creation of Europe's central bank in January 1999.

The bank's hawkish pursuit of an anti-inflationary credo has turned it into a model for central banks around the world, including Europe's proposed central bank, which economists say is likely to be the world's most powerful central bank. However, with a meeting of the Bundesbank's central council set for this week, the question hanging over Europe's establishment is whether the bank will strike one last blow for the cause of independence by signalling a rise in German interest rates.From May next year, when European leaders select those nations qualifying for monetary union, the Bundesbank will begin to coordinate its actions with other European central banks.

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