Non-Germans need not apply to replace Trichet at European Central Bank
EUROPEAN DIARY:There is near-unanimity that Chancellor Angela Merkel is kingmaker for the prominent post, writes ARTHUR BEESLEY
BREAKFAST WITH a senior EU official. Over brioche and orange juice, the question arises as to the impact of the debt crisis on other European business. Simple, the fellow says. No matter what the initiative, gauging the likely response in Berlin towers above all other considerations.
Nowhere is this more so than in the race to succeed Jean-Claude Trichet at the helm of the European Central Bank (ECB). Trichet’s mandate expires in October. He is a Frenchman with a Germanic attitude to inflation and fiscal correctitude.
All signs suggest his successor will be German. But who? Time was, straight-talking Bundesbank chief Axel Weber was considered a shoo-in. Chancellor Angela Merkel played a long game to promote him, holding German candidates back from the fray when EU leaders made other big appointments. That was the way Herman Van Rompuy became president of the European Council, and Cathy Ashton became foreign policy chief.
Berlin’s ploy was leaked far and wide. The sense was that Merkel did a private deal with French president Nicolas Sarkozy to ensure his support. It might have been game over at that point were it not for one thing: Weber’s public airing, repeatedly, of his reservations about the ECB’s ongoing interventions in sovereign bond markets. He also opposed other forms of exceptional ECB support for financial markets.
This was greeted with astonishment in Frankfurt, Brussels and Paris. Not only did Weber’s dissent lift the lid on disunity in the ECB’s governing council – it also smacked of a public challenge to Trichet’s authority. Whatever about back-stabbing, as common in EU politics as anywhere else, this was akin to full-frontal assault. It was seen as far beyond the pale.
Weber’s remarks left some central bankers wondering whether he wanted to lead the ECB at all. “He’s been so outspoken, reflecting on the internal debates of the board, which is not done,” said a well-placed observer. Still, the Frankfurter Allgemeine Zeitung has reported that Luxembourg’s central bank governor Yves Mersch and ECB chief economist Jürgen Stark had similar reservations about the bond programme. They, however, did not go public.
The word from Berlin is that Weber felt duty-bound to express himself in this way, no matter what the consequences. He is said to have adopted a “so be it” attitude to the possibility of losing the ECB presidency on this account. Still, he has sent a very strong signal about the direction the ECB might take under his leadership. That is not without significance.
Predictably, Weber’s challenge to Trichet went down badly in the Élysée Palace. In the last week, as euro finance ministers debated an appointment to the ECB’s executive board, Paris let it be known again it opposes Weber for the bank’s presidency. Sarkozy’s resistance to a German nominee may prove futile – it’s not France’s “turn” to choose the bank’s leader – but he may be angling for other concessions from Merkel.
German sources say the chancellor has yet to make up her mind on who to back. There is near-unanimity, however, that she is kingmaker. “The main question is what the Germans want. If they want to have a German, they will get it,” said a senior European official. If Merkel wants Weber, therefore, he will be the man.
This presumes the chancellor ultimately agrees to expand the scope and scale of the euro bailout fund. After all, key strands of that debate would see the fund take on policies that Weber opposed in the ECB. If that happens, too, a renewed push to deploy the ECB “exit strategy” might soon be made.
Interesting here are remarks last week by EU Commission chief José Manuel Barroso, who meets Merkel today as he pushes for a swift agreement to expand the bailout fund. “I think the scope of its activities should be extended in order to counter some concerns here in Germany, namely that the ECB should not expand its activities too much,” he told Der Tagesspiegel.
It is open to Merkel to back another German. A name often mentioned is that of Klaus Regling, head of the bailout fund. He’s not a central banker, but the speed of his appointment would suggest his stock is high. Germany also has an ample supply of heavyweight central bankers religiously attached to the battle against inflation. With all that in mind, it seems non-Germans need not apply.
When not partying, Italian prime minister Silvio Berlusconi continues to promote Mario Draghi of the Bank of Italy. Draghi is suave, assured and good on economic nitty-gritty.
Observers say his former association with Goldman Sachs might prove too much for MEPs, who must back his nomination.
Another outside possibility is Dutch central bank chief Nout Wellink, whose candidacy may be weakened by the fact Trichet’s predecessor, Wim Duisenberg, was Dutch. Officials also speak highly of Finnish central bank chief Erkki Liikanen, but Olli Rehn’s charge of the commission’s economics portfolio would seem to rule him out.
Once Portuguese nominee Vitor Constancio became ECB vice-president last year, the top post was always destined to go north. Right now, most insiders are looking no further than Germany.