Philip Lane favoured for ECB economist post in EU job reshuffle

Euro area finance ministers will fire the starting gun this week on the race to succeed Peter Praet as chief economist of the European Central Bank, with Ireland's Philip Lane widely expected to secure the first of a number of top EU job appointments this year.

EU diplomats said the highly regarded Mr Lane, governor of the Irish central bank, was a strong favourite to replace Mr Praet, a Belgian, who is stepping down in May at the end of his eight-year term.

ECB president Mario Draghi is a known admirer of the Irishman, who is viewed as one of the most highly qualified economists among the eurozone's central bank governors. Mr Lane is a vocal supporter of the ECB president and his appointment would offer continuity after October, when Mr Draghi is due to step down.

Ireland is at present the only founding member of the currency bloc never to have had a central banker on the ECB’s six-person executive board.

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But Mr Lane still may face a contest for the job. EU diplomats said the Austrian government is considering putting forward Andreas Ittner, vice-governor of its central bank, as a rival candidate to replace Mr Praet.

Mr Ittner, who has been at the National Bank of Austria since 1983, is seen by ministers as having strong credentials in the areas of financial stability and statistics, but less relevant direct experience for the chief economist role. Austrian central bank governor Ewald Nowotny has also clashed with the ECB, at times preferring a more hawkish monetary policy than Mr Praet or his boss.

Karel Lannoo, chief executive of the Centre for European Policy Studies, said Mr Lane was "a serious economist at a time when we need to safeguard the degree of economic expertise at the ECB".

The nomination process to replace Mr Praet — which finance ministers will formally open on Monday — will mark the second time Ireland has put forward Mr Lane for a senior ECB post.

The country tried to secure the vice presidency of the central bank for him last year, but Mr Lane ultimately withdrew in the face of overwhelming support among national governments for then Spanish economy minister Luis de Guindos.

Mr Praet’s departure marks the start of a year of big changes at the bank, with the exit not only of Mr Draghi but also of Benoît Cœuré, another executive board member, who steps down at the end of the year.

Guntram Wolff, director of Bruegel, a think-tank, said the decision on Mr Praet’s replacement will feed into the negotiations on the other posts, because of the need for the executive board to reflect the different parts of the currency bloc and their competing visions for monetary policy.

“These appointments are always a difficult balancing act between nationalities, smaller and bigger member states, hawks and doves,” Mr Wolff said. “We should move away from this and simply go for the best people.”

The leadership of the EU's political institutions will also be overhauled this year after European Parliament elections in May, putting an unprecedented number of top EU jobs in play at the same time.

Mr Lane, a Harvard-trained economist, is a strong supporter of the Draghi-era crisis policies — notably huge asset purchases — that have been criticised by Berlin as overstepping the ECB’s role.

One diplomat said his appointment may encourage Germany and other northern members of the currency bloc to push for a more hawkish replacement for Mr Draghi to refocus the bank on its core task of maintaining price stability.

The field of potential candidates to replace the president is seen by diplomats as wide open, with French central bank governor François Villeroy de Galhau, Erkki Liikanen, the former governor of Finland’s central bank, and Dutch central bank chief Klaas Knot among the names in the frame.

Mr Cœuré’s name is also often mentioned, although with the caveat that a tweak would have to be found to ECB rules that ban executive board members from successive mandates.– Copyright The Financial Times Limited 2019.