Kohler, Horst

▪ 2001

      On March 23, 2000, after months of international wrangling, German banker Horst Köhler was named the managing director and chairman of the executive board of the International Monetary Fund (IMF), a UN agency established in 1944 to secure international monetary cooperation, stabilize exchange rates, and expand international liquidity. His accession was due in large part to the determination of Germany's chancellor, Gerhard Schröder, that—for the first time—a German should head the IMF. Schröder's first choice for the post, Caio Koch-Weser, the nation's deputy finance minister, was rejected by the United States because he did not meet “the criteria of maximum stature who would be able to command support from around the world.” Undaunted by the rejection of Koch-Weser, Schröder embarked on a vigorous and ultimately successful campaign to persuade other European nations, some of which had their own candidates for the post, to line up behind Köhler.

      Köhler was born on Feb. 22, 1943, in Skierbieszow, Pol. As the Soviet army advanced into Poland during World War II, his family fled to East Germany; they escaped to the West in 1953. Köhler earned a doctorate in economics and political sciences in West Germany from the Eberhard-Karl University of Tübingen and served (1969–76) as a scientific research assistant at the university's Institute for Applied Economic Research before joining the German government. In the early 1990s, as a member of the Finance Ministry, he played an important role in the economic planning for German reunification and also helped provide aid to Russia after the breakup of the Soviet Union. His major achievement at the time, however, was as Germany's lead official in the difficult negotiations that led to the Maastricht Treaty in 1991, which formed the foundation of European financial and monetary union.

      In 1993 Köhler became the head of the national association of German savings banks, and in 1998 he was chosen to run the European Bank for Reconstruction and Development (EBRD). In that capacity he helped shift the EBRD's priorities away from large infrastructure projects and toward support for small businesses. He also succeeded in improving the EBRD's finances. In 1998 the bank lost $252.8 million, but in 1999 it earned a profit of $41 million. As head of the IMF, Köhler faced many critics of former IMF policies. In the U.S., for example, both Congress and the Clinton administration strongly urged the IMF to follow more “hard-line” economic principles while undertaking its task of rescuing financially troubled nations. Recent IMF “rescue packages” were assailed as being ineffective (Russia), causing undue hardship (Indonesia), and failing to punish banks and investors adequately for risky investments (South Korea).

David R. Calhoun

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