Career in local politics

In his early days, Eichel was known for his campaigns for green causes and against nuclear weapons but for most of his political career, he became associated with stimulating investment and creating jobs. He was noted for his consensus building skills and an ability to mix pragmatism with a mastery of detail. Eichel believed strongly in European federation and on merging Europe's armies and foreign services, and on giving them a single foreign minister. He argued that Europe would be very much stronger if it spoke to the outside world with one voice.^[10]

From 1975 to 1991, Eichel served as mayor of Kassel, initially gaining the office at the age of only 33.

Minister-President of Hesse, 1991–1999

From 1991 to 1999, Eichel was the Minister-President of Hesse in a coalition government with the Green Party. The coalition won again four years later and was the first red-green coalition to serve two consecutive terms. Eichel also served as President of the Bundesrat from November 1998 to April 1999. However, he unexpectedly lost the 1999 state elections to Roland Koch's CDU and lost his office.

Minister of Finance, 1999–2005

In March 1999, Oskar Lafontaine resigned as Minister of Finance in the government of Chancellor Gerhard Schröder, and Eichel replaced him a month later. He served as a member of the Bundestag from 2002 to 2009.

Eichel in 2001

At the beginning of his term, Eichel tried to decrease the German federal deficit and wanted a balanced budget until 2006.^[11] Initially he was successful and earned the nickname Iron Hans^[12] or Iron Minister^[13] because of his ability to exercise strict budget discipline. The Economist magazine's description of him:

It was Mr Eichel who achieved Germany's biggest tax cuts in half a century, preached a fierce austerity, and stuck rigidly to a policy of squeezing the budget. For two years after taking over as finance minister in 1999 from the left-wing, fiscally extravagant Oskar Lafontaine, Mr Eichel was the government's star. Despite his penchant for spending cuts, he was widely admired for his integrity, courage, and unwavering loyalty to Chancellor Gerhard Schröder^[14]

Despite initial success, due to constraints by the cabinet and by the worsening economic situation after the short boom in 1999/2000, he had to abandon those plans. After the election Eichel had to recalculate the budget due to the deteriorating economy and found that he would have $18 billion^[15] less in tax revenue than was anticipated. The German budget deficit was 3.8%, exceeding the 3% ceiling set by the EU's Stability Pact. Until 2005, when he stepped down, Eichel did not reduce the deficit to under the 3% stability threshold, mainly due to the decision from Chancellor Schroder to not force excessive austerity on the German people on top of the deep economic reforms taking place.

Toward the end of his term, in late 2004, Eichel and U.S. Treasury Secretary John W. Snow worked out a proposal to cancel 80 percent, or about $33 billion, of the debt owed by Iraq to a group of creditor nations known as the Paris Club, capping an American effort for debt forgiveness.^[16]

Controversy

Eichel had a public spat in 2003 with then International Monetary Fund (IMF) chief Horst Köhler, accusing Köhler and the IMF of being too harsh on Germany and too soft on the risks and policy failures of the United States. Köhler defended the harsh criticism of Germany and rejected the notion that the IMF was too soft on the US. However, experts pointed out in 2003 that there was growing evidence that the IMF was reluctant to explore the more problematic aspects of American economic and financial policies such as the concentration of derivative risks at a few big US financial institutions and early warning signs of the building up of risks in Fanny Mae and Freddie Mac.^[17] The public and global sentiment in 2003 was against Eichel as Germany was then viewed as the 'sick man of Europe' but consequently, the developments of the global financial crisis radiating out of the US, happening in parallel with the renaissance of the German economy, would suggest that Eichel was in the right.

After the tax reforms of 2001 and 2002, the German banking industry association sent Eichel's internal revenue ministry three letters in total in late 2002 and early 2003 warning about a tax loophole allowing investors to receive more than one tax reimbursement for a single short transaction. Depending on how many times investors short sold a share in a period of 48 hours after a dividend disbursement, tax refunds were erroneously paid out up to four or five times for that single short-sell transaction. Eichel's ministry took no corrective action in response, and from that time forward, gradually larger and larger amounts of forfeited tax revenue resulted.^[18]

G-20

The G-20 was created in 1999 in the aftermath of the Asian financial crisis as a forum for cooperation and consultation on matters pertaining to the international financial system.

According to senior researchers at the Brookings Institution, the G-20 was founded at the initiative of Eichel, then German finance minister who was also concurrently chair of the G-7. Other sources identify Hans Eichel, US Treasury Secretary Larry Summers, and Canadian Finance Minister Paul Martin as the three key initiators.^[19][20]

According to University of Toronto professor John Kirton, the membership of the G-20 was decided by Eichel's assistant Caio Koch-Weser and Summers' assistant Timothy Geithner. In Kirton's book 'G20 Governance for a Globalised World',

Geithner and Koch-Weser went down the list of countries saying, Canada in, Spain out, South Africa in, Nigeria and Egypt out, and so on; they sent their list to the other G7 finance ministries; and the invitations to the first meeting went out.^[21]

The group was formally inaugurated in September 1999, Canadian finance minister Paul Martin was chosen to be the first chairman and German finance minister Hans Eichel hosted the first G-20 meeting of finance ministers in December 1999 in Berlin.^[22]