The Economist

The EconomistJuly 21 st 2018 53

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LOT rests on the shoulders of the euro

zone’s top central banker. The presi-

dent of the European Central Bank( ECB) is

not just in charge of ensuring monetary

and financial stabilityin one ofthe world’s

largest economies. In the absence of a sin-

gle European fiscal authority it also falls to

the ECBto act as a backstop for the curren-

cy bloc. In times ofcrisis the very survival

of the monetary union seems to depend

on the president’s words and actions. Cen-

tral-bank bosses in America Japan or Brit-

ain bear no burden as great.

With such demands though comes

great influence. Those in need of convinc-

ing need only cast their minds back to July

2012. Greek interest rates were soaring and

investors were entertaining the possibility

that the euro zone would breakup. But Ma-

rio Draghi the ECB’s boss soothed markets

with a promise to do “whatever it takes” to

save the euro. Six years on that commit-

mentstill helpsto contain Italy’ssovereign-

bond yields despite unease about its new

government’s economicpolicies.

Mr Draghi’s term does not end until Oc-

tober 2 019. But the jostling to replace him

has already started. His successor will be

chosen after much horse-trading between

the 19 euro-zone members. Bycomparison

last year’s choice of Jerome Powell to lead

America’s Federal Reserve looks a breeze.

open fora northern president.

With the euro area’s largest and most

populous economy yet to hold the post

most observers agree that it is Germany’s

turn. The obvious candidate would be the

boss of the Bundesbank Jens Weidmann.

A survey last month of economists by

Bloomberg a news agency put him as the

most likely choice.

But the job is not in the bag. An advo-

cate of a minimalist role for the ECB Mr

Weidmann has often been in the dissent-

ing minority on big policy decisions. In

2013 he testified in Germany’sconstitution-

al court against the bond-purchase scheme

that gave substance to MrDraghi’s promise

to save the euro. Some reckon he has toned

down his criticism of the bank recently

perhaps to position himself for the top job.

Even so he is unlikelyto have manysouth-

ern European supporters. Insiders also

wonder if he is too orthodox to dream up

unconventional solutions in a crisis.

Political capital

Angela Merkel Germany’s chancellor

could probably ensure his elevation. But

other countries’ leaders would demand

big concessions in return. And she may

not after the past difficult decade see

much to gain from having a German at the

bank’s helm. Teutonic zeal for price stabil-

ityand fiscal discipline has not been popu-

lar in crisis-stricken countries. It might be

safer to back a candidate from another

northern European country who shares

German views but is less divisive.

Erkki Liikanen the boss of Finland’s

central bank is moderately hawkish and

seen in Frankfurt as a constructive contrib-

utor to policy debates. Though he is 67 and

stepped down from the Bank of Finland

Political jockeying has been a feature of

the ECB’s presidency ever since it was set

up 20 years ago. Its mandate followed that

of the German Bundesbank in enshrining

price stability and independence. Even so

the Germans doubtful of southerners’

commitment to low inflation insisted on

Wim Duisenberg a Dutchman theysaw as

a kindred spirit as president. The French

wanted one of their own. The fudge was

that Mr Duisenbergwould step down half-

way through his term to make way for

Jean-Claude Trichet a Frenchman who

was Mr Draghi’s predecessor.

Complicating the negotiations over the

next presidency is the fact that other big

jobsare atstake too. Vacanciesatthe top of

the European Commission and European

Council will also open up next year. And

there are other spots at the bank that need

filling. This week it began its search for a

chief bank supervisor to replace Danièle

Nouy a Frenchwoman. Peter Praet a Bel-

gian member of the bank’s executive

board will leave in May.

Member states need to decide which

roles they want and what to concede to get

them. At the ECB a balance between

northerners and southerners is considered

essential. The choice in March of Luis de

Guindos a Spaniard as its vice-president

for example is thought to leave the field

The European Central Bank

Succession planning

Mario Draghi’s replacementwill be chosen aftermuch political haggling

Finance and economics

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