Mersch closer to ECB top job says Bloomberg

Yves Mersch lost out on the European Central Bank’s vice presidency last year but could still move to Frankfurt as ECB President.

Luxembourg’s central banker, an art-loving former gymnast with a penchant for colorful glasses, may become a compromise candidate for the top ECB job after the frontrunner, Germany’s Axel Weber, withdrew from the race last month, said economists at ABN Amro Bank NV and Royal Bank of Scotland Group Plc. The current favorite, Italy’s Mario Draghi, must overcome the stigma of a prime minister embroiled in a sex scandal and his country’s poor track record of containing inflation.

The decision on who will replace Jean-Claude Trichet at the ECB’s helm when his eight-term term expires on Oct. 31 may rest with Germany, Europe’s largest economy, which hasn’t occupied a top European post since 1967. With Weber’s surprise exit leaving Chancellor Angela Merkel without an obvious candidate, Germany’s preference for an inflation-fighting ECB president in the Bundesbank mould may play into Mersch’s hand.

“Mersch stands a good chance as a compromise candidate if Germany decides not to field its own candidate,” said Nick Matthews, a senior economist at Royal Bank of Scotland in London. “Mersch offers a similar viewpoint as Weber, and would therefore appeal to the Bundesbank traditionalists. At the same time, he has the diplomatic skills that Weber was said to be lacking.”

ECB Veteran

Mersch declined to comment on whether he’s interested in Trichet’s job during a press conference in Luxembourg today. In the central bank’s quarterly report, he said “strong vigilance” is needed to stem inflation risks, indicating he supports raising ECB interest rates next month.

Mersch, 61, is one of the longest-serving members of the ECB’s now 23-strong Governing Council, having been there since the bank’s inception in 1998. He is also Luxembourg’s first central bank governor. Prior to the introduction of the single currency on Jan. 1, 1999, his country, with just over 500,000 inhabitants, was in a monetary union with neighboring Belgium.

A lawyer rather than an economist by training, Mersch is a former head of Luxembourg’s Treasury and had stints working at the International Monetary Fund and United Nations in the late 1970s and early 1980s. His international experience may help him forge consensus among ECB policy makers from the euro area’s 17 nations.

 

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Jonathan Boyd
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