Thursday

22nd Oct 2020

Berlin scrambles for new EU bank candidate

  • Axel Weber - the man at the centre of this week's confusion (Photo: INSM)

German Chancellor Angela Merkel is expected to ask Axel Weber to resign from his position as Bundesbank president on Friday (11 February), with the central banker's reported withdrawal from the ECB presidency race leaving Berlin scrambling to find a new candidate.

Leaks suggest Mr Weber conveyed his lack of interest in taking over from Frenchman Jean-Claude Trichet this October to Bundesbank colleges on Tuesday evening, stunning finance officials across Europe who had seen the hawkish central banker as the frontrunner for the top ECB post.

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The news is also perceived as a major set-back for Ms Merkel who was known to be angling for a German takeover of the ECB presidency in order to shore up her citizens' faith in the euro currency and the various rescue plans to save it.

Many Germans have been angered by what they see as tough sacrifices to save heavily indebted peripheral eurozone members such as Greece and Ireland, with attention now turning to other potential candidates.

The confusion in Berlin could strengthen the chances of experienced Italian central bank governor Mario Draghi, although his southern member state origins were seen as a weakness to his bid.

With a relatively light European Commission portfolio and failure to field candidates for other senior EU jobs, Berlin is thought to have been aiming for the ECB post for some time.

Potential German replacements for Mr Weber at the Bundesbank, providing a platform to run for the ECB presidency, include Ms Merkel's own economic adviser, Jens Weidmann. Another possible candidate, Klaus Regling who heads the European financial stability facility, has never been a central banker.

A controversial figure who openly spoke out against the ECB's extraordinary decision in May to start buying sovereign eurozone bonds, Mr Weber was nevertheless thought to enjoy tacit support for the ECB post from Paris.

"I am dumbfounded," said French finance minister Christine Lagarde, although the prospect of the hawkish central banker taking over this October is known to have created concern among many of her compatriots.

Mr Weber's likely departure is being met with relief "not among the Germans, but every country from Italy to Greece, probably," Marco Valli, chief euro zone economist at UniCredit in Milan, told the New York Times. "The French are not particularly sad."

Choosing a smooth communicator, as well as a competent banker, will be a key consideration for Ms Merkel if she does, as expected, ask Mr Weber to step aside on Friday, say analysts.

There is still a slim chance the chancellor could try and persuade Mr Weber to run for the ECB presidency post, rather than move to the private sector as he is reportedly considering.

The ECB's enlarged role as a result of the financial and eurozone debt crises has placed it under a closer spotlight as market participants seek to predict the bank's next move, with this week's confusion adding to suspicions Mr Weber lacks the necessary communication skills.

Bungled messages from EU leaders have also been blamed by many analysts for exacerbating the eurozone's difficulties over the past year.

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