Abstract
In May and June 1997, Germany's commitment to Economic and Monetary Union (EMU) underwent its most serious test ever when the Bundesbank and the government of Chancellor Helmut Kohl clashed openly over the government's plans to revalue the country's gold reserves. Faced with a budget shortfall and strong political opposition to either tax increases or spending cuts, Finance Minister Waigel attempted to introduce a modest change in the Bundesbank's bookkeeping procedures to bring them in line with the standard practices at other European central banks. The Bundesbank resisted, arguing that the changes would infringe upon its closely guarded independence. This paper explores the political and economic circumstances behind the conflict.
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