May 29, 2019 / 3:32 PM / a year ago

Breakingviews - Imagine choosing Mario Draghi’s successor on merit

European Central Bank (ECB) President Mario Draghi and European Union Economic and Monetary Affairs Commissioner Olli Rehn (R) attend an eurozone finance ministers meeting at the EU Council in Brussels January 27, 2014. REUTERS/Francois Lenoir

LONDON (Reuters Breakingviews) - Imagine, for a moment, that the next head of the European Central Bank was chosen on merit. In reality, the process of selecting Mario Draghi’s successor is likely to involve a complex tug of war between rival governments as they carve up the European Union’s top jobs. But as Finnish central bank chief Olli Rehn told a Reuters Breakingviews event on Wednesday, the deciding factor should be competence rather than nationality. If politicians could be persuaded to play along, they could judge the candidates on three broad criteria.

The first condition should be a central banking pedigree. Leadership of the Frankfurt-based institution is too important to be trusted to someone with no previous experience of setting interest rates. The resulting dearth of female contenders is deplorable. But parachuting someone who has not been at the helm of their national central bank into the top job would be a mistake. That rules out deputy chiefs such as France’s Sylvie Goulard, as well as international policymakers like Christine Lagarde, currently head of the International Monetary Fund.

Assuming that European leaders won’t consider other nationalities, this narrows the field to current rate-setters, or former ones, such as Finland’s Erkki Liikanen.

The second qualification should be an ability to cajole and convince investors and citizens across the euro zone. The ability to communicate well at home is a start. But whoever gets the top job will have to sell the ECB’s sometimes controversial policies to all the single currency area’s 19 members.

So while Bundesbank boss Jens Weidmann might be a hit in Germany, he will have to work harder to speak with Italians or Greeks – particularly given his past vocal opposition to the ECB’s ultra-easy monetary policy. Klaas Knot of the Netherlands may have a similar handicap. Central bankers like Belgium’s Pierre Wunsch, meanwhile, have little profile outside their home country.

By contrast, Bank of France Governor Francois Villeroy de Galhau speaks French, German and English. Rehn and Liikanen – who have both held senior positions in the European Commission – also score well on this count. So does Benoit Coeuré, a member of the ECB Executive Board who has worked closely with Draghi. The Frenchman may be excluded by the rule that says sitting board members are ineligible. But if EU leaders want a stellar communicator at a time when rhetoric has become an integral part of the central bank toolbox, they could find a way around this.

Open-mindedness is another key attribute. The next ECB president, who is appointed for an eight-year term, will probably face another economic downturn with policy interest rates at ultra-low low levels. That will require creativity and an ability to think beyond the conventional central bank toolkit.

Rehn scores well on this front. On Wednesday he said the ECB needed to spend some time analysing why inflation has remained low and could then perhaps review its monetary policy strategy for the medium and long term.

French and German eagerness to secure top EU jobs means Weidmann and Villeroy de Galhau are the probably the favourites to replace Draghi in real life. But in an alternative and more meritocratic world, they would face stiffer competition.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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