Introduction
Milestone birthdays present an opportunity to reflect not just on one's own age but also to anticipate upcoming family birthdays of significance or recall past family anniversaries. Central banks are no different in this respect. Many central bank histories start with a reference to the oldest surviving member of the family, the Swedish Riksbank, founded in 1668. In the genealogical table of the oldest central banks in the world, drawn up by Forrest Capie, Charles Goodhart and Norbert Schnadt in their seminal contribution marking the tercentenary of the Bank of England, the privilegirte oesterreichische National- Bank (OeNB) comes in sixth. Apart from the above-mentioned Sveriges Riksbank and the Bank of England (1694), the only central banks founded before the OeNB were the Banque de France (1800), the Bank of Finland (originally established as the Finnish Office for Exchange, Lending and Deposits in 1811) and De Nederlandsche Bank (1814). Finishing sixth was in fact close for the OeNB: Founded on June 1, 1816, it is just 13 days older than Norges Bank. Yet this genealogy does not list defunct family members like the Banco di San Giorgio (1407-1805), the Bank of Amsterdam (1609-1820), or the Wiener Stadtbanco (1706-1816), precursors who would change the ranking had they survived. Moreover, central banks' birth dates are frequently stated with the reservation that early on, these banks had few similarities with contemporary monetary authorities, evolving into central banks as we know them only in a slow process and over an extended time span. Passage to adulthood, to continue the analogy, is generally linked to the assumption of a lender-of-last-resort role, meaning the provision of sufficient central bank money during a financial crisis if required. To this end, the central bank must have "grown up" to be a neutral, nonprofit-oriented economic agent who acts in the general economic interest rather than competing with other commercial banks.
Two recurring challenges
Now, if the OeNB was born in 1816, when did it reach adulthood? The eventful history of Austria's central bank does not lend itself easily to a teleological interpretation according to which early banks of issue developed into modern central banks at a determinable point in time. Thus, rather than judging at what point and to what degree the OeNB fulfilled modern-day criteria of central banking, a more appropriate approach is to view the bank as an institution that operates in a space that both in the past and today is defined by two dimensions: monetary stability and financial stability.
Of course, the meaning of monetary and financial stability has changed during the past 200 years. Originally, money was considered to be stable if all coins were struck with consistent amounts of metal; later, the notion of monetary stability was linked with the convertibility of paper money against coins with a specified metal content. Not until the 20th century was monetary stability understood as the stability of a broadly defined index of consumer prices. Financial stability, on the other hand, has typically been a much broader concept, embracing the smooth operation of payment systems; last resort lending; the supervision of individual banks and other financial intermediaries; or the prevention of macroeconomic imbalances such as real estate price bubbles driven by excessive mortgage lending, which may jeopardize the stability of the entire financial system. The basic issue of monetary and financial stability has always been the same: Since money has been around, the sovereigns who exercised the right of coinage had an incentive to finance their expenditure by debasing the currency, either by reducing the weight of coins or by adding base metals to the alloy. Numerous instances of inflation from Classical antiquity to the modern age demonstrate this process; paper money, once it had been invented, made debasement only easier. As money and credit are closely related, financial crises have a long history as well.
Thus, upon its birth in 1816, the privilegirte oesterreichische National-Bank entered a well established area of politics in which it came up against a traditional player, the state, and the legacy of a municipal bank that was in some ways its predecessor and that used to be closely associated with the state: the Wiener Stadtbanco. The arrival of a "national bank" was a game changer insofar as the new bank was endowed with tasks and decision-making duties that had formerly been under the jurisdiction of the finance ministry. At the same time, the new bank received (at least some) independence from the state and some freedom from direct state control. Over time, the actual allocation of individual monetary policy responsibilities among the bank and other economic agents, especially the state, changed several times, as did the general economic and political setting within which monetary policy was run.
Looking at the 200-year history of the OeNB reveals that monetary policy again and again faced conflicting choices: first, the provision of a stable legal tender versus inflationary incentives to finance the state and boost the economy; second, the delegation of economic policy to an independent central bank versus the need to control this bank; third, transparency and accountability versus confidentiality; and fourth, a close versus a more arms-length relationship with the banking sector. Similarily, the issues that needed to be resolved against this backdrop of conflicting choices resurfaced time and again: Should exchange rates be flexible or fixed, and to which currency should fixed exchange rates be pegged? How should wars be financed? How should excess money in the aftermath of wars be handled? How should illiquid or insolvent banks be dealt with? How can the build-up of imbalances in the financial system be stopped? Should internal or external stability take precedence? Should capital movements be restricted? With regard to the broader institutional framework conditions, the latest game changer was the creation of the Eurosystem. In the Eurosystem, which comprises the European Central Bank (ECB) and the national central banks of the euro area countries, including the OeNB, central banking decision-making has largely shifted to the European level. Yet here, too, the same issues arise and the same decisions need to be taken as in previous decades and centuries.
Reading the past in the light of the present
These recurring themes are also reflected in the narratives of the OeNB's history. Of course, as a central actor in domestic and occasionally, like in 1857 or 1931, international economic policy, the bank deserves a prominent place in any account of Austria's political and economic history. Often, the questions and methods with which the history of the OeNB has been interpreted were influenced by big conceptual swings in historical science. An example of the significance of international trends for the historiography of Austria is the abundant literature on 19th century economic growth, which was produced at the same time as a similar literature on other European countries. However, the regular resurfacing of the same issues and problems in monetary policy means that narratives of central bank history are likely to have been influenced more strongly by current issues than other areas of historiography. This is true even of the comprehensive chronology of OeNB history that historian Siegfried Pressburger compiled in the 1960s and 1970s: Although his narrative meticulously follows the sources he consulted, it at the same time echoes the themes that dominated the economic policy debate of the time-demand management and exchange rate policy-wherever he made reference to current themes.
In the case of studies focusing on selected aspects of Austria's monetary history, the impact is to be felt to an even greater extent. Thus it comes as no surprise that a number of studies written during inflationary World War I and immediately afterward would closely examine the sovereign default and the currency reform following the inflation during the Napoleonic wars. More recently, the dissolution of the Soviet Union and the breakup of Czechoslovakia revived interest in the collapse of the crown currency area after 1918. By the same token, the European unification process and the discussion surrounding the design of the Economic and Monetary Union in Europe prompted analyses of the operation of the partly similarly structured currency area in the dual monarchy before 1918. The transition from the Austrian schilling to the euro in 1999 spawned a number of studies exploring the history of the schilling. The discourse on the merits of fixed versus flexible exchange rate regimes is an evergreen in debates on economic policy. Last but not least, the banking crisis of 2008 rekindled researchers' interest in the crises of 1873 and 1931, while the international financial support programs for Greece, Ireland and Portugal sparked a review of the League of Nations loans and related foreign control of Austrian fiscal policy in the 1920s and 1930s. These studies have either been published in recent years or are forthcoming.
Partly, the choice of perspectives and topics is driven by the ambition to draw lessons from the past to help solve the urgent problems of the present. Yet it is just as important that current events lead us to question and redefine our understanding of the past. After all, the conventional wisdom no longer appears adequate in numerous cases, either because recent experience has cast doubts on the logic of old interpretations or because aspects and details of particular interest to us today have not been covered in the existing histiography. For instance, overview publications summarizing the OeNB's history in the 19th century largely neglected the role of the bank in the economic integration of the monarchy and barely scratched the surface in examining the relationship between the central bank and commercial banks. A closer look at these topics is relevant against the backdrop of the European integration process and of the new role of central banks and the EU today, and at the same time casts new light on the evolution of the OeNB from the treasury's banker to the banker's bank, a subject that was given short shrift in older publications.
This book is the first endeavor since Othmar Bachmayer and Siegfried Pressburger wrote their surveys of Austrian monetary history 50 years ago to provide a concise yet comprehensive overview of the history of the Oesterreichische Nationalbank. Since then, the collapse of the post-World-War-II monetary order under the Bretton Woods system, Austria's hard currency policy and the introduction of the euro have added important new chapters to the bank's history. Additionally, new works on the history of Austria's central bank published in the past 50 years have inspired us to reassess some of the older accounts. Finally, this history represents an opportunity to assign greater weight to the role of the OeNB in securing financial stability and to its role as the banker's bank than previous historical treatises did. To better meet the objective of delivering a compact overview, we have focused on selected developments in the two key areas of central bank policy: monetary stability and financial stability. Rather than providing an all-encompassing history of the OeNB, we favor overview descriptions over a chronological narrative wherever possible, omitting events that are not needed to understand the big picture. Issues not limited to a particular era or chapter, such as the definition of lender of last resort or monetary policy operations, are treated in boxes. For further reading, readers may turn to the ten-volume work heavily based on internal OeNB documents that Siegfried Pressburger began on the occasion of the 150th anniversary of the OeNB and that was completed with contributions by Hans Kernbauer and Fritz Weber in recent years. Pointers for further reference are provided in our exhaustive bibliography.
