Fri Jan 21st, 2011 at 05:27:38 AM EST
Jean Quatremer asks whether the successor to Jean-Claude Trichet at the head of the ECB will be a monetarist "hawk" or a pragmatic "politician", and reminds us that, for the moment, the undeclared candidate who is generally supposed to be the favourite is the ultra-orthodox Bundesbank chairman, Axel Weber. Weber is opposed not only by ET (there was even a suggestion here that we run a "Stop Weber!" campaign), but also by Nicolas Sarkozy. "The Elysée doesn't want Weber at any price", says Quatremer, "but still hasn't found a candidate Berlin might accept as a replacement." But the new governor of the ECB is scheduled to be appointed in June, or at the very latest October.
Quatremer points out that Trichet has been criticised by both Chirac and Sarkozy for "rigidity and obsession with inflation". However, Trichet is now recognised as being more flexible - Quatremer credits him with this:
|BCE: après Trichet, à qui le tour ? - Coulisses de Bruxelles, UE||ECB: after Trichet, whose turn? - Backstage Brussels, EU|
|Dans la nuit du 9 au 10 mai, pour sauver une zone euro au bord de l’explosion, le président de la BCE a convaincu le conseil des gouverneurs de jeter par-dessus bord l’un de ses dogmes et a obtenu de pouvoir racheter sur le marché secondaire, celui de la revente, les obligations d’États de la zone euro attaqués par les marchés afin de casser la spéculation et stabiliser les cours.||During the night of 9 to 10 May, to save the eurozone at the brink of explosion, the chairman of the ECB convinced the governing board to throw overboard one of its dogmas, and obtained the right to buy on the secondary market (where bonds are sold on), eurozone sovereign bonds attacked by the markets, so as to break speculation's back and stabilise prices.|
Quatremer also credits Trichet with the decision not to take ratings agency notation into account when eurozone bonds were offered as collateral for borrowing from the ECB. Axel Weber, (and Jürgen Stark, the ECB's German chief economist) were both opposed to these measures and got in Trichet's way time and again -- and publicly:
|Le président de la Buba n’a pas hésité, dès le 11 mai, à faire connaître publiquement son désaccord avec la décision de la BCE, rompant ainsi un principe pourtant imposé par l’Allemagne lors de la négociation du traité de Maastricht, celui du secret des délibérations. Désaccord depuis répété sans relâche, Weber allant même jusqu’à plaider pour le retrait des facilités de financement accordées aux banques et pour une augmentation des taux d’intérêt…||The Buba chairman didn't hesitate, 11 May, to let it be publicly known he disagreed with the ECB decision [re secondary market buying], thus breaking a rule that had all the same been imposed by Germany in the Maastricht Treaty negotiations, that of the secrecy of ECB deliberations. The disagreement has not ceased since, Weber pushing it as far as to argue for withdrawal of financing facilities extended to banks, and in favour of an increase in interest rates...|
France and southern member states don't want this kind of hawk in charge of the ECB, while the Netherlands, Finland and Austria would join Germany in supporting him. The problem for Paris, says Quatremer, is to avoid open conflict between North and South, which would end in victory for the latter (since the vote on the chair of the ECB is by qualified majority of the European Council of heads of government), and humiliation for Germany. A compromise candidate needs to be found that will save Germany's face while preventing Germany from running the whole show with ultra-hawks.
Possible candidates: the Italian Mario Draghi, the German Klaus Regling (current chair of the guarantee fund EFSF), the chairman of the Bank of Finland, Erkki Liikanen. But Draghi used to work for Goldman Sachs... Regling doesn't speak French... Liikanen isn't from a "major" country...
Political candidates might also be found. Didier Reynders, Belgian finance minister for more than a decade, is a possible. Dominique Strauss-Kahn's name has also been flown, though having a Frenchman succeed a Frenchman at the ECB would be near-impossible (and would DSK want to leave the IMF for the ECB, renouncing a highly likely victory in the French presidential election of 2012?).
Yet (thinks Quatremer, and so think I), finding a candidate is vital if Weber is to be stopped. Any suggestions?