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Analysis

Weidmann and the ECB

Nearly two-thirds of advisers expect Draghi's successor to be German

by Julian Frazer in London

The Franco-German compact faces possible strains, with a series of key European appointments over the next two years. The jobs that will come under discussion include those of the presidents of the European Commission (2019), European Council (2020), the Eurogroup of finance ministers (end-2017), and the European Central Bank (2019).

This month's advisers network poll focuses on the future leadership of the European Central Bank. Members of the network were asked: 'After Mario Draghi steps down as president of the ECB in November 2019, who will replace him?' The choices were Jens Weidmann, president of the Deutsche Bundesbank, François Villeroy de Galhau, governor of the Banque de France, or someone else.

Of those polled, 61% forecast that Weidmann will take over from Draghi, while 30% believe that Villeroy de Galhau will be selected. Just 9% expect the role to go to another candidate, drawing particular attention to policy-makers in Spain and the Netherlands.

Weidmann was appointed president of the Bundesbank, which runs for a renewable eight-year term, in May 2011. Assuming he holds the post for the full term, he would be the first person to do so since Karl Otto Pöhl in the 1980s. On present assumptions, Weidmann has a good chance of having his term renewed sometime towards the end of next year. This would see him start a second eight-year mandate in May 2019.

The leadership of the ECB is a matter of great political debate in Europe. Since its establishment in 1998, the Bank's six presidents and vice presidents have come from five countries – the Netherlands, France, Italy, Portugal and Greece.

If Weidmann were to become ECB president, he would join a band of senior German policy-makers at the head of major European institutions. Werner Hoyer was reappointed in July as president of the European Investment Bank; his term runs until end-2023. Klaus Regling will continue to oversee the European Stability Mechanism until 2022. Elke Koenig has been chair of the Single Resolution Board since 2015. Weidmann’s tenure at the top of the ECB would last until 2027.

Any candidate requires the endorsement of all European Union finance ministers; Almost certainly by the time Draghi’s successor is decided, Britain will have left the EU. He or she then has a hearing at the European Parliament, which casts a non-binding vote. The post is finally confirmed by euro-area leaders, which is then held for a total of eight years. The parliament has no power to block ECB appointments.

September Poll Chart

'Weidman is the individual most likely to provide credibility to the ECB, which will probably be sorely needed against a backdrop of QE ending, Brexit, and (hopefully) a very long-lived economic cycle. However, political turmoil could easily lead to a compromise choice of ECB president.'
Colin Robertson

'After two presidents from large Latin countries it is hard to predict whether it is the turn of a small country or of a German who will reinstate a degree of orthodoxy after years of unorthodox measures. In the latter case, Weidman will be the natural choice.'
Fabio Scacciavillani

'I suspect Jens Weidmann will get it, although I think it would be nice if someone other than a Frenchman or German were chosen. But among the euro area governors, I don't see anyone that stands out.'
Hans Genberg

'A German ECB president would concentrate far too much power in German hands. But the outcome will depend on who fills the top slots as presidents of the Commission, Council and Eurogroup after May 2019.'
Denis MacShane

'Why not Klaas Knot, the president of the Dutch central bank? He is as tough as Weidmann, but not a German; that might make him more acceptable for other countries.'
Roel Janssen

'Never underestimate French ingenuity in the business of horse trading.'
Akinari Horii

Julian Frazer is Subeditor at OMFIF.