What kind of steersman qualifies as ECB president?

16:04, February 22, 2011      

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Business uncertainty still surrounds the withdrawal of the European Central Bank (ECB) candidate Axel Weber, the president of the German Central Bank. And the race of succeeding the ECB President Jean-Claude Trichet is heating up.

There has not yet been a central bank president from Germany even though the country is the biggest financial contributor to the Euro zone. One name frequently mentioned was that of Erkki Liikanen, the governor of the Bank of Finland, but Finland has said Liikanen is not a candidate however.

Italian Central bank governor Mario Draghi may be the favorite to head the ECB after Germany's Axel Weber drew his name from consideration for the soon-to-be CEB president. Despite his high reputation as a moderate hawk, Draghi will have to work very hard to win over Germany.

Then, who will emerge to take the post of this essential duty when the haze of the European debt crisis is still looming over, and the outside world is full of questions and anticipation on the issue.

Following a week of speculation about his future, German Central Bank President Axel Weber has resigned, effective at the end of April, without a candidate for the presidency of the European Central Bank.

The ECB, considered to be a prop or support to stability in Europe, is the central bank to manage supranational currency, and its responsibility of vital importance is to maintain the fiscal stability. On the issue of coping with a sovereign debt crisis, its bond purchase programs, whose objective was to address the multi-functioning of security markets and to restore an appropriate monetary policy, has given rise to a lot of questions and controversies.

Last May, ECB decided to purchase government security bonds as part of an endeavor to coordinate a 750 billion Euro rescue mechanism, but met with an opposition from Axel Weber and a few others who deemed the "risks were too big" and that could possibly intensify the euro zone bloating and harm the independence of ECB. And Weber's manner resulted in a heated debate among the Eurozone core-member nations, such as Italy and France, and led to the dissatisfaction of Greece, Ireland and other nations mired deep in debt-ridding crisis.

The "blow out" of Axel Weber is deemed as a forceful attack on German Chancellor Angela Merkel, as she has desperately looked to a supporter like Axel Weber, who have taken financial conservative approach but with strong monetary measures. For Chancellor Merkel, Wiber's withdrawal leaves her without a most ideal candidate as the ECB presidency.

Therefore, the outsiders are concerned about who will be the next leader of ECB and they are actually pay close attention to the policy trend changes in coping with the crisis. At present, the Italian Central Bank president Mario Delargy; the chief of executive officer (CEO) of the "European Financial Stability Facility", Clause Regling; and Ewald Nowotny, the Austrian Central Bank Governor, have all entered the name list of candidates to vie for the next ECB head.

On analysing the ECB presidential candidate, two advantageous factions, namely the "nationality" faction" and the qualification or service record faction.

Those from the "nationality" faction holds that the incumbent ECB vice-president Vtowl Kangstan was the former Portuguese Central Bank president, and it implies that the next ECB president will come from a northern country, so as to enable the northern Eurozone and southern Europe to stay in balance with either key post of the ECB president or vice-president. So, the Italian Bank President Delargy, once assigned to the world bank with much rich experience, has however been constrained with a little possibility for top ECB post due to geographic consideration, while Germany is the largest national economy in Europe, and so a German citizen is entitled to the top ECB post.

The "service record" faction maintains that a successor to Jean-Claude Trichet as head of the ECB should be selected among 23 members of he ECB Governing Council and needs to have rich experience to guarantee the independence of the ECB. In the meanwhile, the ability to reach consensus and to communicate it clearly is essential, so as to ensure that all policy information of ECB can be available on markets.

To take into account varied conjectures and surmises, the French economic minister indicated that the next ECB President should be selected based only on ground of merits and their resolve to battle inflation rather than the qualification of one's "nationality".

Either politics game or Geobalance should not become the factors affecting unity and cooperation and an effort to cope with financial crisis in Europe, which has yet to free itself from its sovereign debt crisis.

By People's Daily Online and its author is PD reporter Wu Lejun


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