Merkel abandons plan for German head of ECB

GERMAN CHANCELLOR Angela Merkel has abandoned her plan for a German head of the European Central Bank (ECB) and will today tell Bundesbank president Axel Weber to leave his post in Frankfurt next week.

Mr Weber (53) caught the political and financial establishment off guard with his decision to stand down early as Bundesbank president.

“He is no longer a candidate for the ECB, neither is there a German candidate,” said a well-placed government source. “It’s all settled. People here are scratching their head and just think it’s tragic.”

In a speech in Vienna yesterday, Dr Weber declined to comment on his future plans.

“I spoke with the German chancellor and promised her that I would not comment before we were able to meet for another talk,” he said. “We will co-ordinate in taking all necessary decisions.”

Dr Merkel is expected to urge him today to leave his post by this day week to allow a quick handover. The premature departure of the Bundesbank president – his regular term ends next year – leaves Berlin’s ECB game plan in tatters.

For years Dr Merkel and finance minister Wolfgang Schäuble had assured Dr Weber that he was the only German candidate. However, they told him they would prefer to announce his name as close as possible to the departure of ECB president Jean-Claude Trichet in October.

Advisers to Mr Schäuble yesterday described him as “not amused”. Another adviser said that Dr Merkel, whose relationship with Dr Weber was marked by “mutual respect, if not warmth”, felt “duped”.

“There’s an astonishing amount of improvisation going on,” said a government source.

There is no ECB Plan B in Berlin and no serious consideration of any of the alternative candidates being floated.

Front runners include Italy’s central bank head Mario Draghi, Erkki Liikanen of Finland, Luxembourg’s Yves Mersch and Nout Wellink of the Netherlands.

For now, though, the ECB is of secondary importance in Berlin.

With the Bildtabloid already wondering "how dangerous Weber's departure is for our euro", Dr Merkel had to act quickly to stabilise the Bundesbank.

The succession race there is a toss-up between two experienced hawkish candidates: Jürgen Stark, former ECB board member; and Jens Weidmann, departing financial adviser to Dr Merkel and a former student of Mr Weber. Mr Weidmann was already planning to depart the chancellery for the Frankfurt bank later this year.

Dr Weber, a professor of economics, was seen as a shoo-in for the top ECB job until last autumn when he questioned the wisdom of the ECB’s decision to buy sovereign bonds of struggling member states.

That hawkish taboo break poisoned his relationship with Mr Trichet and prompted several other shots across the bow: just last week he attacked Germany’s euro zone reform proposals as “lacking ambition”.

On Wednesday, the Bundesbank denied reports that Mr Weber announced his departure plan to close colleagues with the words: “I don’t want to be a political football”.

The rumours prompted a drop in the euro, although the currency recovered quickly on exchange markets. The uncertainty will only complicate the ongoing debate over the single currency’s sovereign debt crisis.

Dr Weber was himself an emergency replacement in 2004; his predecessor Ernst Welteke resigned after it emerged he had accepted a luxury weekend break in Berlin from Dresdner Bank to mark the launch of the euro bank notes and coins three years earlier.

German analysts dismissed speculation yesterday that Dr Weber might be considering replacing Josef Ackermann when he retires as chief executive of Deutsche Bank. “That’s impossible,” said one bank executive who asked not to be named. “He’s burned now.”