The worst-kept secret in the euro zone is that Jens Weidmann, head of Germany’s central bank, would like to succeed Mario Draghi as president of the European Central Bank when the Italian’s term expires next year.
But for Mr. Weidmann to attain that goal will take some nimble maneuvers on the part of Berlin and probably exact a high cost in concessions from Germany in other areas. On top of that, it’s far from certain that Mr. Weidmann – for all the qualities esteemed by both his supporters and his critics – would be the best choice for the job.
The launch this week of a search for the new ECB vice president sets a leadership carousel in motion that ultimately will determine who will take Mr. Draghi’s place. Governance of the central bank for the 19-nation euro zone is a finely balanced mechanism aimed at keeping both big and little countries happy and fairly representing both northern and southern Europe. This is a tricky proposition with a six-member executive board.
It hurts any candidate when his name comes up so early. Jörg Krämer, chief economist, Commerzbank
Replacing ECB Vice President Vítor Constâncio of Portugal, whose term expires in June, thus will be the first move in an elaborate game of three-dimensional chess. One of the many unwritten rules in ECB protocol is that the top two jobs should be divided between northern and southern Europe (although Mr. Constâncio, who was appointed during the presidency of France’s Jean-Claude Trichet, was an exception once Mr. Draghi came to the helm).
So Germany is likely to support Spanish Finance Minister Luis de Gindos for the post, to keep the way free for Mr. Weidmann then to accede to the presidency next year. Although long considered the leading candidate, the German central banker is not the only northern European eying the job. The central bank presidents François Villeroy de Galhau of France and Philip Lane of Ireland, both current members of ECB governing council, are also thought to be in the running.
Being the frontrunner is not helping Mr. Weidmann, however. “It hurts any candidate when his name comes up so early in succession talk,” said Jörg Krämer, chief economist at Commerzbank, “although there’s nothing Jens Weidmann can do about that.”
Among the other hurdles facing Mr. Weidmann is the very fact that Germany is already so dominant in the euro zone that a German at the head of the ECB might only intensify resentment in the rest of the bloc. Germany might have to make concessions in order to overcome that resistance, for instance in other personnel appointments or in the construction of the banking union.
Even for the Berlin government, it may not be completely comfortable to have a German in the ECB post. Under Mr. Draghi, for instance, Berlin can take credit for its budget surplus, resulting at least in part from the ECB’s low interest rates, while blaming the ECB when private savers complain about those very same low rates. Berlin couldn’t treat Mr. Weidmann that way.
Last not least, Mr. Weidmann’s well-known hardline stance on monetary issues might pit him against his own colleagues in the event of another crisis. The German has opposed many of the measures adopted under Mr. Draghi to ease the consequences of the 2008 crisis – notably, the central bank’s asset purchases as a form of quantitative easing.
If Mr. Weidmann does get the appointment and joins the executive board, current board member Sabine Lautenschläger would have to leave, since yet another unwritten rule is that the six-member board can’t have two members from the same country. An elegant solution to that problem would be to let Ms. Lautenschläger take Mr. Weidmann’s place at the Bundesbank, the German central bank, where she previously served as vice president.
But that would bring up the thorny issue of gender diversity in the top ranks of the ECB, where women are already acutely underrepresented. Not only is she only woman on the executive board, she is only one of two in the ECB governing council. The European Parliament, in particular, is pushing for greater diversity. The parliament votes on ECB nominees, though its vote is not binding on the national governments.
A possible replacement would be Sharon Donnery, deputy governor at the Irish central bank. Ireland is the only founding member of the currency union that hasn’t had a representative in the ECB’s top echelons. Other female candidates would be France’s Hélène Rey, who teaches at the London School of Economics, or Sylvie Goulard, a deputy governor of the French central bank – but not, of course, if Mr. Villeroy de Galhau gets the nod as new president over Mr. Weidmann.
Handelsblatt reporters Jan Mallien and Frank Wiebe cover the European Central Bank. Darrell Delamaide is a Handelsblatt Global editor in Washington, DC. To contact the authors: [email protected], [email protected], and [email protected].