The process of choosing senior officials at the European Central Bank always has been an intricate kabuki drama, with countries forced to delicately balance their political and financial interests with those of other countries and even regions. The personnel drama has started once again, and officials in Berlin are more optimistic than ever before that when the final curtain comes down, a German banker will be seated as the head of the ECB for the first time.
The main cause for such optimism was the decision disclosed on Monday that EU countries have coalesced around the Spanish economy minister, Luis de Guindos, to become vice president of the ECB. In the process, Ireland’s central bank chief, Philip Lane, dropped out of the running for the deputy job. The term of the current vice president, Portugal’s Vitor Constâncio, ends in May.
The complex process works like this: when the richer northern part of the EU supports a single candidate from the EU’s southern states for the vice president’s job at the ECB, the top job at the central bank is supposed to go to a candidate from a northern country. But filling that job also depends on who becomes the next head of the European Commission, a post now held by Luxembourg’s Jean-Claude Juncker, and the European Council president, a post now occupied by Poland’s Donald Tusk.
Weidmann has a good chance. Guntram Wolff, director, Bruegel think tank
In addition to Mr. Lane dropping from consideration for the ECB, Mr. De Guindos needed to win the support of Germany and France, leaders of the northern bloc, to get the vice president’s job. That also happened Monday, with Germany’s interim finance minister, Peter Altmaier, saying the Spaniard is “an excellent choice.” A final decision will be made at the summit of EU leaders in March.
German officials now hope that the stage has been set for Jens Weidmann, the current head of the German central bank, the Bundesbank, to succeed ECB president Mario Draghi, whose term ends in October 2019. “The election of De Guindos as vice president is another building block to strengthen Weidmann’s candidacy,” said Daniel Gros, head of the Center for European Policy Studies, a Brussels-based think tank.
Another reason for the optimism is that even though Germany has the largest economy in Europe, a German has never been chosen as ECB president. “Everyone knows that and that’s why Weidmann has a good chance,” said Guntram Wolff, director of the Brussels-based economic think tank, Bruegel.
Still, Mr. Weidmann will have to overcome European doubts on a number of fronts. Germany has never held the job before because there was a reluctance to give Germans so much power after World War II, but those memories have mostly faded and no longer represent much of an obstacle.
A bigger issue is likely to be the Bundesbank’s well known hard-money policies: abhorrence of debt, zero interest rates, and quantitative easing –- central bank purchases of bonds – which have been vigorously deployed by Mr. Draghi to pull Europe out of its economic malaise.
In addition, the ECB is already located in Frankfurt and the bank’s structure was purposely modeled on the Bundesbank, which some critics believe is enough German influence.
If Mr. Draghi is a classic dove on monetary policy, then Mr. Weidmann is a hawk. Countries like Greece and Portugal will no doubt ruefully recall the extremely painful austerity measures demanded by former German Finance Minister Wolfgang Schaüble during their economic crises.
For example, would Mr. Weidmann be as willing as Mr. Draghi to announce that the ECB would buy unlimited amounts of sovereign bonds from struggling countries in the European southern tier? In fact, at the time in 2012, the main opposition to Mr. Draghi’s plan, which probably saved the euro from collapse, came from Mr. Weidmann.
The Bundesbank chief told Der Spiegel magazine that the bond purchases were "too close to state financing via the money printing press for me. The central bank cannot fundamentally solve the problems this way. It runs the risk of creating new problems.”
Officials in Brussels believe the final decision on ECB chief may depend on French President Emmanuel Macron. He is said to be keen for France to get the commission president’s job when Mr. Juncker steps down. For that to happen, Germany would have to go along, so there may be a deal in the making to enable Germany’s choice at the ECB and France’s position at the commission.
Ruth Berschens is Handelsblatt's bureau chief in Brussels, Frank Wiebe covers finance policy for Handelsblatt, and Charles Wallace is an editor for Handelsblatt Global in New York. To contact the authors: [email protected], [email protected] and [email protected].