Spain's Finance Chief Set to Secure ECB's No. 2 Post -- Update
20 February 2018 - 3:57AM
Dow Jones News
By Todd Buell
BRUSSELS -- Spain's finance minister looks set to secure the No.
2 position at the European Central Bank after his only rival for
the post withdrew, opening the door for something many Germans have
long wanted: one of their countrymen leading the ECB.
Luis de Guindos was Monday expected to be nominated by eurozone
finance ministers as the next ECB vice president after Ireland
withdrew its nomination of Philip Lane, the governor of the Irish
central bank.
That in turn could make room for a German to replace Mario
Draghi as president of the ECB given the fact that a German has yet
to head the Frankfurt-based institution, and appointing a
representative from Northern Europe to the top post could be viewed
as a counterbalance to Mr. de Guindos being from Southern
Europe.
Mr. de Guindos's appointment would mark the first step in a
lengthy process to select the next slate of top ECB officials.
Those appointed will likely choose the pace at which eurozone
interest rates rise again, after falling to historic lows in a bid
to combat fears of deflation. The selection process is as much
based on national political positioning as on policy
competence.
The Spanish politician was widely seen as the front-runner for
the No. 2 role, "given the unwritten rule that the four largest
eurozone countries should be represented in the ECB's executive
board," said Frankfurt-based ING economist Carsten Brzeski in a
note last week.
However, Mr. de Guindos's experience as a politician irritates
some central bankers who fear he isn't qualified.
"It is too late for on-the-job training when you join the ECB
executive board. This is a person who has no central bank
experience at all," said Stefan Gerlach, a former deputy governor
of Ireland's central bank and now chief economist at EFG Bank in
Zurich.
In recent years Germans have watched uncomfortably as Mr.
Draghi, an Italian, pushed through policies, such as buying
government bonds and negative interest rates, that run counter to
Germany's penchant for saving and fear of inflation. Germany also
has yet to have one of its nationals atop the ECB. Mr. Draghi's
predecessors were Frenchman Jean-Claude Trichet and a Dutchman, the
late Wim Duisenberg. Now, many in Germany say it's Berlin's
turn.
"A [Jens] Weidmann presidency currently looks like the scenario
with the highest probability at the bookies," said Mr. Brzeski,
referring to the head of Germany's central bank.
However, betters might be in for a surprise. It is far from
certain that Mr. Weidmann will ultimately succeed Mr. Draghi when
his term ends in October 2019. Mr. Weidmann's criticism of some of
the ECB's signature policies could preclude him from leading the
institution, say observers who follow the ECB closely.
"His record is problematic," said Mr. Gerlach.
Mr. Weidmann has opposed two of the central bank's key
crisis-fighting tools, the bond-buying program that emerged out of
Mr. Draghi's "whatever it takes" speech in 2012 and the
quantitative-easing program in 2015.
Some observers wonder if those southern eurozone countries that
were helped by Mr. Draghi's activist policies would support Mr.
Weidmann's candidacy. "There will be a discussion that Weidmann
represents a very hawkish view and one that would not be to the
best interest of the southern economies," said George Pagoulatos, a
professor of European Politics at the Athens University of
Economics and Business.
However, Mr. Weidmann could adjust his policy preferences as the
head of the ECB. "The fact that he's German could give him more
elbow space to apply policies that are more beneficial to the
eurozone at large," said Mr. Pagoulatos.
Other potential candidates mooted include French central bank
governor Francois Villeroy de Galhau and International Monetary
Fund head Christine Lagarde, also French. Appointing a woman could
help address the lack of women guiding EU institutions.
In withdrawing Mr. Lane's nomination for ECB vice president,
Ireland's Finance Minister Paschal Donohoe said he thought the
election had to be based on consensus and not the source of any
disagreement.
Mr. Lane is still considered to be a top candidate for a future
vacancy on the ECB's six-member executive board. The role of chief
economist will be available next spring, and the Irishman is
thought to be a leading contender for that role.
Write to Todd Buell at todd.buell@wsj.com
(END) Dow Jones Newswires
February 19, 2018 11:42 ET (16:42 GMT)
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