Finance

Changing of the guard

Weidmann signals the obvious: He wants the ECB’s top job

Let's do it my way. Source: Reuters

Source: image

Any lingering doubts about Jens Weidmann’s career plans were swept aside last weekend when the Bundesbank president telegraphed his preference for the European Central bank’s next boss: none other than Mr. Weidmann, of course.

When asked if he was interested in Mario Draghi’s job, Mr. Weidmann, speaking in an interview with the German Funke media group, coyly said the discussion was premature, but that all ECB governing council members could be in the running. “I think every member of the ECB council should have the creative drive to get involved in monetary policy in a different role,” the Bundesbank chief said.

After eight years at the helm, the powerful Mr. Draghi will leave the ECB in October 2019. Mr. Weidmann, who is often mentioned as the leading candidate, enjoys the support of Chancellor Angela Merkel and would be the first German to run the euro-zone’s central bank. Insiders say the Germans’ willingness to appoint Luis de Guindos, the Spanish economics minister, as the ECB’s vice-president, would make Mr. Weidmann more palatable to debt-laden southern Europeans, who expect the German to take a tougher stance on credit.

But Mr. Weidmann’s appointment isn’t a done deal. In 2012, he was the sole member of the ECB’s governing council who voted against unlimited purchases of EU sovereign debt to defend the euro. Other aspirants to the ECB’s top job include French central bank chief Francois Villeroy de Galhau, his Irish counterpart Philip Lane, and Estonian central banker Ardo Hansson. Some observers expect the ECB to name a successor as late as summer 2019, after the next European Parliament elections.

Every member in the ECB council should have the creative drive to get involved in monetary policy in a different role, too.

Jens Weidmann
Bundesbank president and ECB council member

In the interview, Mr. Weidmann said euro-zone inflation was on its way to meeting the ECB’s target, taking a more liberal view on price stability than Mr. Draghi, and exposing a rift in the governing council in interpreting the ECB’s mandate.

With inflation edging higher, ECB policymakers are now debating whether to end the bank’s €2.55 trillion ($3 trillion) bond purchase scheme after September, phasing out so-called quantitative easing as the 19-member currency bloc enjoys its best economic boom in a decade.

“The ECB’s latest forecasts project inflation in the euro zone would be at 1.7 percent in 2020,” the media group quoted Mr. Weidmann as saying. “In my view, that is in line with our definition of price stability.” Mr. Draghi, on the other hand, has previously said that such a figure was not really in line with the ECB’s inflation target – close to, but below 2 percent.

The 50-year-old Bundesbanker added that wrapping up the bond buys this year was “plausible” given rapid growth and argued that the normalization of monetary policy should not be needlessly postponed. “I do not want to predict a council decision, but I think it would be sensible to clarify this soon and to announce an end date,” Mr. Weidmann said.

Observers are expecting the bond buys to come to a close in late 2018, with interest rates seen rising sometime around the middle of next year.

Jeremy Gray is an editor with Handelsblatt Global in Berlin. Jan Mallien covers monetary policy for Handelsblatt in Frankfurt. To contact the authors: j.gray@handelsblattgroup.com, mallien@handelsblatt.com