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With German board member Sabine Lautenschläger having unexpectedly resigned last month, and her French colleague Benoît Cœuré’s eight-year term ending in December, there are two open slots to be filled. [...]
Eurozone governments have an informal understanding that Germany, France, Italy, and Spain, which together constitute three-quarters of the eurozone economy, can always have a national of their choice on the board. That means the open slots are likely to be filled by a German and an Italian (because Lagarde, like Cœuré, is French, while the departing Draghi is Italian).
That seems like a sensible way to help ensure the ECB’s continued political legitimacy. Unfortunately, there can be no guarantee that large countries always have the best candidates to propose. In fact, two of the most credible contenders to succeed Draghi, the Finns Erkki Liikanen and Olli Rehn, come from a small country. So did the ECB’s first president, the Dutchman Wim Duisenberg.
In considering appointments to the ECB, governments naturally think of candidates who will forcefully support “the national view,” if indeed such a thing exists. The German government will thus probably prefer a hard-money proponent who believes that the central bank’s policy is far too expansionary and that interest rates are too low for individual savers, pension funds, and insurance companies alike. Meanwhile, the Italian government may propose a candidate who thinks the ECB should pursue a full-blown asset-purchase program, cut its key deposit rate further, and not put too much pressure on banks to sort out their stocks of non-performing loans.
But such candidates are unlikely to be very influential in the ECB’s Governing Council – as the example of Bundesbank President Jens Weidmann illustrates. Weidmann undoubtedly has all the necessary skills to be a successful ECB president: he has an impressive grasp of monetary theory, plenty of policy experience, and is a clear and engaging public speaker.
Unfortunately, he appears to have pushed the German view (or, perhaps more accurately, that of many German commentators) too strongly. [...]
For the same reason, Weidmann has had little impact on ECB policy, which is effectively determined by where the council’s center of gravity is on any particular issue. Council members who are too far away from that center, even if they are in tune with national sentiment, are disregarded and lose influence. [...]
Thus, rather than proposing Executive Board candidates who will forcefully promote national views, the German and Italian governments should instead consider nominees who are likely to be able to influence ECB policy. That calls for candidates who do not have predictable and rigid opinions on the issues that the Governing Council will face in the near future, such as whether the ECB should prolong its asset purchases and/or cut interest rates further.[...]