Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble believe it is high time for a German to lead the European Central Bank, and they have already picked their favorite candidate.
Handelsblatt learned that the German government is working on a plan in which Jens Weidmann, the head of the German central bank, or Bundesbank, would succeed ECB President Mario Draghi when the Italian’s term expires in 2019. Der Spiegel newsmagazine also reported the story this weekend.
Under Mr. Draghi’s leadership, the ECB has sought to stimulate the euro zone’s stalled economy through record low interest rates and a massive bond-buying program. This policy, known as quantitative easing, has met resistance in Germany, where low interest rates have squeezed banks and pinched investors who eschew riskier stocks for traditionally safer savings, life insurance and pension plans.
Mr. Weidmann, as all central bank presidents of the 19-nation euro zone, already has a seat on the ECB’s governing council. He is a leading monetary policy hawk and has long been a vocal critic of the ECB’s dovish stance. An ECB led by Mr. Weidmann would give greater weight to Germany’s more hawkish views, likely triggering resistance from southern European countries. Sources told Handelsblatt the German government intends to head off resistance from the south by backing Luis de Guindos of Spain as the ECB vice president. But backing a southern European as Mr. Weidmann’s deputy might not be enough.
“Weidmann would be able to get past the southern countries only if the federal government offers broad concessions in exchange,” said one source. This could include agreeing to back common bonds for the euro zone, the source said, a measure the German government has long resisted.
“Jens Weidmann is a terrific colleague who has great competence in monetary policy. He is very highly valued in the ECB Council.”
The Germany government is expected to not push for executive board member Sabine Lautenschläger to become head of the ECB’s supervisory mechanism, to give a clear sign that it does not want to dominate the central bank.
Ms. Lautenschläger would also probably have to give up her board seat if Mr. Weidmann becomes ECB president. An unwritten rule at the ECB forbids the six-member executive board from having more than one member of the same nationality. Ms. Lautenschläger has been floated as Mr. Weidmann’s successor at the Bundesbank, although the bank said no decision had been made.
Mr. Weidmann already has potential backers within the ECB. Gaston Reinesch, ECB governing council member and Luxembourg’s central bank chief, said it is still too early to debate who should succeed Mr. Draghi, but he praised the German central banker
“Jens Weidmann is a terrific colleague who has great competence in monetary policy. He is very highly valued in the ECB Council,” he said.
The German finance ministry said no decision had been made about the ECB leadership. “Mr. Draghi’s term lasts until 2019. Currently, there is no reason at all to discuss his succession, let alone make any decisions about it,” a spokeswoman said in a statement.
Mr. Weidmann is not the only candidate in the running. France’s central bank chief, François Villeroy de Galhau, is also viewed as a leading contender for ECB president. Mr. Villeroy, more dovish than his German counterpart, has repeatedly called for the ECB to use all means at its disposal to boost inflation to just below the 2-percent mark.
The French central banker, speaking last March at a business conference in Frankfurt, said it was still too early for the ECB to end its loose monetary policy, even though euro-zone inflation has neared 2 percent. Reuters reported him at the time as saying “Given this progress, should we stop pursuing an accommodative monetary policy? At this stage, the answer is clearly no.”
This position is clearly at odds with Mr. Weidmann’s position. In an interview with Austria’s daily Der Standard on Saturday, he again called for the ECB to change course: “We cannot delay the normalization of monetary policy out of consideration for the finances of a few countries or because of losses among some market participants,” he said.
Mr. Weidmann and Mr. Villeroy are said to admire each other though they often speak at cross purposes.
In a 2016 joint guest column for the daily Süddeutsche Zeitung, the central bankers called for a common finance minister for the euro zone. After publication, Mr. Weidmann hedged and said the euro-zone member states would first have to give up an extensive amount of sovereignty, a move they would be unlikely to make. Soon, Mr. Weidmann and Mr. Villeroy were no longer able to agree on the article’s message, an ECB colleague told Handelsblatt.
Though Mr. Weidmann is well respected, he is no shoo-in for the job. His predecessor at the Bundesbank, Axel Weber, also had ambitions to become ECB president, but was forced to throw in the towel due to a lack of political support. But this time could be different. Dutch, French, and Italian nationals have already served as ECB presidents. Now, many feel, it is Germany’s turn.
And French officials, in particular, have been well represented at the top. Jean-Claude Trichet served as ECB chief for eight years, and the central bank’s current bank supervisor, Danièle Nouy, is a French national. This ultimately may work against Mr. Villeroy, even though he is viewed as every bit as well qualified for the position as Mr. Weidmann.
France’s central bank, for its part, declined to weigh in on the debate about Mr. Draghi’s successor: “We have an ECB president whose term goes until 2019 and who is doing a terrific job,” said a spokesperson for Mr. Villeroy.
Perhaps anticipating a shot at the ECB presidency, Mr. Weidmann has softened his hawkish rhetoric and struck a more conciliatory tone. He has even defended the ECB against its German critics. Central banks “cannot promise minimum returns for savers because they must focus on the broader economic impact of their monetary policy,” Mr. Weidmann told a Munich audience in April, rebuffing German concerns that low interest rates were eroding personal savings.
In an interview with the Financial Times, the Bundesbank chief even sounded a bit like a dove: “The ECB has to deliver on its price stability mandate and thus an expansionary monetary policy stance is appropriate at this juncture regardless of different views about specific measures,” Mr. Weidmann said.
But factors other than Mr. Weidmann’s record are also at play. There is the question of where the European Banking Authority, or EBA, will move its London headquarters after Britain leaves the European Union. Insiders believe it is unlikely that Germany can both seat the ECB president and bring the EBA to Frankfurt. And in addition to Mr. Draghi’s looming departure, the terms of EU Commission President Jean-Claude Juncker and European Council President Donald Tusk also end in 2019.
“The heads of government will have to stitch together a big personnel package and that will happen, at the earliest, after Germany’s federal elections,” said one source.
Martin Greive is a correspondent for Handelsblatt based in Berlin. Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin and is deputy managing editor of Handelsblatt’s Berlin office. Jan Mallien covers monetary policy for Handelsblatt out of Frankfurt. Daniel Schäfer is head of Handelsblatt’s finance pages and based in Frankfurt. To contact the authors: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org and email@example.com