Bank in Midlife Crisis

For decades, Germany's central bank was a national icon that stood as guarantor for a strong currency and the country's postwar economic miracle. With the advent of the euro, however, it started sinking into insignificance.

"Not all Germans believe in God, but they all believe in the Bundesbank," said European Union head Jacques Delors back in 1992.

Things changed a decade later with the introduction of the common European currency. At that time, the Bundesbank lost its prime function of setting interest rates to the European Central Bank (ECB).

An important role?

And even though cost-cutting and job losses overshadow the 50th anniversary of Bundesbank on Aug. 1, the bank's president, Axel Weber, believes it has an important role to play in deciding the course of European monetary policy.

"We need a strong Bundesbank as an integral part of the euro system," he said.

Weber represents Europe's biggest economy in the ECB's 19-member rate-setting council, where Germany has the same clout as much smaller nations like Slovenia or Luxembourg.

But what does it do?

The Bundesbank's main functions today are lending money to trading banks, making sure there is enough cash to fuel the economy, overseeing banking operations and advising the federal government.

But some experts, like Professor Dirk Schiereck of the European Business School in Oestrich-Winkel, believe there is no need for a central bank any more.

"As an institution, it has outlived its usefulness," Schiereck said. "In 50 years' time, there won't be a Bundesbank any more."

Since handing the baton to the ECB, the central bank has been searching for a new role, something which is proving difficult in the 13-storey concrete tower where it has its headquarters in Frankfurt.

A more slender profile

The bank reacted to criticism that it is bloated by announcing plans to cut the number of branches from 127 to 47 by 2012 and trim staff from 10,970 at present to 9,000 over the same period.

The future, however, won't be anywhere near as illustrious as the past when the bank underscored its independence in clashes with various chancellors and finance ministers over monetary policy.

"With an unprecedented policy of stability, the central bank made the deutsche mark one of the world's most stable currencies," said Udo Steffens, a professor at the Frankfurt School of Finance and Management.

The biggest ever cash transfer

The Bundesbank thus became a model for the ECB, which is also headquartered in Frankfurt.

"If it hadn't been for a strong mark, the euro wouldn't be as strong as it is today," Steffens said.

The bank presided over the introduction of the euro in Germany, in what was the biggest ever transfer of cash.

Over a period of days, transport firms distributed 71,500 tons of coins and 2.5 billion banknotes to customers.

But the bank was also tainted by scandal in 2004 when Weber's predecessor, Ernst Welteke, was forced to resign for accepting largesse from a bank he was supposed to oversee.