It should be easy to predict who will succeed Jean-Claude Trichet at the ECB. But since Germany’s Axel Weber said he planned to abandon policy making for academia, the options have been cast wide open.
Communication skills are essential for a spokesman on behalf of a governing council of 23 members.
Unlike with the Federal Reserve Bank of New York, the ECB requires its head to represent all its voices. Its leader does not hold independent influence in the same way chairman of the Fed Ben Bernanke does.
“Maintaining price stability is deeply embedded in the ECB’s DNA,” says Sondergaard.
“The president has only one vote on the Governing Council. Regardless of who takes Trichet’s chair, we doubt that the change in leadership will change the ECB’s policy reaction function.”
More crucial is that the winning candidate is able to face the press when announcing decisions that are extremely sensitive for financial markets, economists agree.
In that sense, personality plays a big role, says Darren Williams, Alliance Bernstein’s senior economist for Europe.
“Wim Duisenberg was amusing at times, but some of his communication left a little to be desired,” he says of Trichet’s predecessor, a Dutchman and the inaugural President of the ECB. Williams calls into question whether a president of one of the smaller central banks would be as well-prepared to take on that role.
“For someone who doesn’t have the experience, it can be a learning curve,” he says.
But Trichet, previously governor of Banque de France, once previously misled markets himself by virtually saying rates were going to be lowered in April 2004, Williams remembers. In the early days, you could tell Trichet was shaky at press conferences, so even he had a learning curve, he adds.
While Trichet has been mainly adept at crisis management, steering the ECB through Europe’s most turbulent economic period since the end of the Second World War, his successor needs to be able to do the same.
Draghi is well-placed, having acted as director-general of the Italian Treasury for ten years, both during a crisis period and while serving under different regimes from the left and the right, says Valli. But in some respects it does not matter which personality leads the bank, so long as they are capable, thinks Williams at Alliance Bernstein. “It probably doesn’t matter in the grand scheme of things,” he says.
“I have a strong view that people tend to get institutionalised. Regardless of what you think outside of the major central bank, you tend to adopt the underlying ethics of the institution.”
For that reason, other than the ‘comfort’ that would have come from a familiar candidate such as Weber taking up the post, Williams has no preference. He thinks Draghi, along with Luxembourg’s Yves Mersch and Dutchman Nout Wellink, possess the gravitas to perform the role well.
But Mersch and Wellink’s odds are likely to have diminished in light of the influence already exercised by the countries they represent within the EU.
Mersch, a former gymnast, was recently touted as a credible alternative to Weber. In February, former German Chancellor Gerhard Schröder publicly gave Mersch his blessing in the Handelsblatt newspaper.
His more hawkish standpoint appeals to the Germans. He wins additional favour with both Germany and France as a Luxembourger who speaks both languages and “understands the mentality”, says Astrid Lulling, a Luxembourg representative in the European Parliament.
Experienced policy maker
As first governor of Banque Centrale du Luxembourg (BCL), Mersch was responsible for the establishment of the institution in 1998.
He is an experienced European policy maker, having attended meetings of the ECOFIN (Economic and Financial Affairs) Council and the EU Summit since the 1980s.
He played an important role in drafting a chapter toward the establishment of the Economic and Monetary Union (EMU). Since it was set up, Mersch has sat on the ECB’s governing council.
But Luxembourg already has a strong presence in European financial circles in the form of Jean-Claude Juncker, giving the Grand Duchy less hope of attaining another powerful position. Last year, Juncker was re- elected for his second term as chair of the Eurogroup panel of finance ministers.