ECB president: In an ideal world, the nationality of the European Central Bank (ECB) president shouldn’t even be an issue. The monetary union’s leaders would simply examine the qualifications of possible candidates, and agree on the best one. Of course, this is not the way it happens — or probably will happen when the time comes, probably in June, to choose a successor to Jean-Claude Trichet, whose term expires in October.
Axel Weber, the head of Germany’s central bank, was long deemed the favourite. No one denies he had some of the qualities required for the job — but on the other hand, no one can deny that he was the preferred candidate mostly on account of his nationality: Germany seemed to think it was its turn, after France, to head the institution. And now, there is still some muttering that the new frontrunner, Mario Draghi, is unsuitable simply because his native Italy has too much debt; or that Erkki Liikanen, another possible candidate, shouldn’t be in the frame because his native Finland is too small.
Weber’s premature exit could ideally be an opportunity for European leaders to make a choice that would be strictly based on qualifications. Here is what an ideal candidate should be:
A hawk
The ECB chief must strongly believe in its mandate. He must focus on the bank’s inflation target. If anything, he should err on the hawkish side. Governments should focus on long-term growth — a central bank must preside over the currency’s stability. This is progress brought upon in the last 20 years by granting central banks independence. Some flexibility is definitely needed in extraordinary times, as Trichet’s ECB has shown with its “non-conventional” measures to support the euro zone’s economy. But the ultimate goal — monetary stability over the medium term — shouldn’t change.
A proven leader
The ECB head must possess strong leadership skills, and proven international authority. The position is slightly different than that of Federal Reserve chairman or Bank of England governor. He must preside over a collective body of 17 central bankers, all authorities in their countries. He must be able to engineer consensus among sometimes differing views which, in turn, often stem from member states’ different economic situations. He must also have enough clout to stand up to and influence 17 finance ministers and leaders. Admittedly that type of leadership could be an acquired skill, but the current crisis demands an ECB president who can lead from day one. A lowest-common-denominator, compromise candidate with little international clout would have trouble filling Trichet’s shoes.
A financial expert
The recent crisis has shown that central bankers must not only have a strong grasp of macro-economic trends, but a good understanding of the way financial markets work and react to both decisions and words. It may be that central banker experience is needed — although not necessarily as head of one of the member countries’ central banks. But, to take an example, Bank of Italy’s Mario Draghi’s three-year stint as a Goldman Sachs banker should certainly not be held against him. Quite the contrary, it may have provided him with some insights into the inner working of markets.
A strong communicator
The ECB has to be able to talk to markets, making the bank’s direction intelligible and predictable. He must lead a pack of 17 central bankers while expressing the group’s consensual or majority view. Maybe more important, he must be able to influence the euro zone’s debates about its future economic and financial governance.
It’s still early to see the field of potential candidates who will emerge behind Draghi in the coming months. In the meantime euro zone leaders would be well-inspired to state firmly that no candidate will be shot down on account of his nationality, just as no one would be chosen because he has the right one.