Bloomberg News

Economist With German Wise Men Wins Roubini Bet

November 14, 2013

Beatrice Weder di Mauro

Beatrice Weder di Mauro said, “If you want to understand countries you study economics.” Photographer: Johannes Eisele/AFP via Getty Images

Beatrice Weder di Mauro, who made her name by being an expert on debt, can’t collect on one of her own: Nouriel Roubini owes her a bottle of Champagne for a 2012 bet they made about whether Greece would leave the euro. It didn’t, and she won.

“We see one another from time to time,” she said of business professor and author Roubini, a frequent fellow panelist at international conferences. “And then we always say, ‘Champagne!’”

Roubini, for his part, swears he’ll pay up “next time I run into her.”

Swiss-born Weder di Mauro, 48, was the first woman ever to serve on the German chancellor’s council of economic advisers, known as the “wise men.” In addition to advising governments, she is on the boards of Swiss bank UBS AG and drugmaker Roche Holding AG, while holding a professorship at the University of Mainz in Germany, where she has taught since 2001.

“I especially love the combination,” she said during an interview at Bloomberg LP’s office in Frankfurt. “It’s interesting just to understand something. But I usually want to understand something because it has an impact.”

The pro-business Thomas Dehler Stiftung foundation awarded Weder di Mauro a prize in 2009, commending her for an op-ed piece in the Frankfurter Allgemeine Zeitung newspaper in which she suggested a plan for winding down a bank to minimize taxpayer losses.

‘Pretty Courageous’

“It was a time with lots of turbulence in Germany, especially whether the government should support Opel,” an automaker owned by General Motors Co (GM:US)., said Hermann Rind, who presided over the prize committee. Weder di Mauro “was pretty courageous in coming out against state support.”

She’s now concentrating on how to stabilize the euro area, whose economy cooled in the third quarter, figures today showed. Last month she quit the board of steelmaker ThyssenKrupp AG to free up time for her work in a European Union-sponsored group studying the possibility of creating a debt-redemption fund and jointly issuing short-term bills.

“She is a good writer and speaker and has an excellent grasp of policy problems,” Ernst Baltensperger, a former director of the Swiss National Bank’s Gerzensee Study Center, wrote in an e-mail. “Her advice is asked for and appreciated by numerous public and private institutions.” Weder di Mauro was on the center’s board from 2008 to 2011.

Guerrilla Warfare

She says it was her childhood in Guatemala, where her father worked for a chemical company, that piqued her interest in economics. The disparity between the Central American state, afflicted by guerrilla warfare, and her own peaceful, prosperous country, to which she returned at the age of 16, got her thinking.

“That certainly had an effect on me,” she said, adding that she initially was fascinated with biochemistry. “If you want to understand countries, you study economics.”

After getting her first degree at the University of Basel and teaching computer skills to help support herself, she stayed on to write a doctoral thesis, entitled “Economy Between Anarchy and the Rule of Law.”

Silvio Borner, professor emeritus of economics at Basel, served as her mentor and was impressed with her hard work and communications skills, he said in a telephone interview. Thanks to her command of Spanish -- Weder di Mauro also speaks English, French and Italian along with her native German -- he hired her to be part of his university research team, which traveled to South America, among other places.

Lost Suitcase

“Once we were in Washington and her suitcase got lost, and she had to wear the same outfit for three days,” said Borner, now retired. “Another person might have gotten upset, but she was just cool and continued to focus on her work.”

While she specialized in economic development at first, her interest in financial markets intensified when she joined the International Monetary Fund as an economist in the European department in 1994.

Finance and development are really “two shoes of a pair,” Weder di Mauro said, citing Argentina’s longtime debt woes.

She contributed to a report, published last month by the Brookings Institution in Washington, arguing there is no legally and politically recognized procedure for restructuring the debt of bankrupt sovereign nations.

Her expertise in finance, enriched by visiting-scholar stints at Harvard University in Cambridge, Massachusetts, as well as posts at the World Bank and the IMF in the mid- and late 1990s, helped get her appointed to the five-member German Council of Economic Experts in 2004. She served until 2012, under former Chancellor Gerhard Schroeder as well as current Chancellor Angela Merkel.

Surprise Choice

Weder di Mauro was the first foreigner, as well as the first woman, to be a member of the body.

“I never expected to be chosen, for exactly that reason,” she said. “They didn’t have such a wide range of expertise and were looking for people who were working in the areas of money and finance.”

From its offices in a 1970s building in the German city of Wiesbaden, the council has urged measures to tackle the euro area’s debt crisis. Last year it suggested member countries exchange any debts exceeding the Maastricht Treaty’s limit of 60 percent of annual economic output. They would get new loans issued by a fund that financed itself with bonds mutually guaranteed by all euro members.

“I’m pretty critical of the council’s majority view,” said Gustav Horn, director of Germany’s IMK economic institute and an adviser to the Social Democrats in parliament. “It’s too mainstream. Ms. Weder di Mauro was always part of the majority. I’d have wished for a council that was more open-minded.”

UBS Compensation

Still, “she’s very knowledgeable in the finance and banking sector, and I’m sure she contributed a lot in that respect,” he said in a telephone interview.

That expertise attracted offers to be on corporate boards in Germany and Switzerland, including one last year from UBS, Switzerland’s biggest bank. She joined at the same time as Axel Weber, her predecessor on the wise-men council. Weber became chairman of the bank after quitting the Bundesbank in 2011 over opposition to the ECB’s bond-buying program to ease the bloc’s debt crisis. He declined to be interviewed about Weder di Mauro.

The UBS board position, together with the post at Roche in Basel, paid Weder di Mauro 900,000 Swiss francs ($983,000) last year, according to the companies’ annual reports.

Sudden Departure

Following the sudden departure of President Philipp Hildebrand from the Swiss National Bank in January 2012, Weder di Mauro was touted by Swiss media, including the Basler Zeitung, as a possible candidate. Members of the body must be Swiss citizens and may not hold another office simultaneously. No woman has ever served on the three-person board; the new member in 2012 was former IMF official Fritz Zurbruegg and Vice President Thomas Jordan, 50, became president.

Current Vice President Jean-Pierre Danthine is the oldest of the three board members, at 63. The age of retirement is generally 65, according to the SNB’s rules, though exceptions can be made until age 68, spokesman Walter Meier said.

Weder di Mauro hasn’t given much thought to what she might be doing in five years. “So far, new, interesting things have always come up, which I hadn’t planned for,” she said. “The current situation with the various and in their own way interesting activities is really quite ideal.”

Her husband is Filippo di Mauro, an economist at the European Central Bank in Frankfurt, who looks into what makes economies competitive. They have a son.

Joint Paper

“We’ve always said, it’d be funny to do a di Mauro/di Mauro paper together, but really we do different things,” she said.

At Mainz, which is less than an hour away from her home in Frankfurt, she teaches four hours a week, almost exclusively to students enrolled in an English-language master program. To allow for her corporate advisory commitments, her teaching load is 50 percent, she said.

Advising the German government on how to tackle the euro-area crisis may have been what gave her confidence in her wager against Roubini, professor of economics and international business at New York University. She said that in January 2012 she bet Greece wouldn’t quit the currency union that year.

Roubini confirmed in an interview that he’d chosen the losing side.

“I owe her a bottle of Champagne,” he said. “I just haven’t seen her yet to pay her.”

To contact the reporters on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net; Jana Randow in Frankfurt at jrandow@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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