Mario Draghi has been President of the European Central Bank since 2011. This is a fixed, eight-year term which cannot be renewed so the hunt for a replacement is underway ahead of Mr Draghi’s departure in October. We’re going to take a look at the appointment process for his successor, who some of the likely candidates are and what this might mean for the Eurozone between now and 2027.
How to get elected?
The rules for becoming the next ECB President are somewhat opaque as this Reuters article explains. However, appointees are usually selected from the current national bank governors in one of the countries which have adopted the Euro. The appointment then needs to be agreed by a majority of European Council members.
What’s the European Council?
The European Council is made up of the various heads of government of the European Union member states, plus the President of the European Commission. This role will only be filled after the forthcoming European elections have taken place and as we explained in this blog post the 2019 vote could well throw out some surprises. That said, one party alone can’t block a nomination, with a so-called qualified majority vote needed. That’s one where 55% of the European Council member states who in turn must also represent 65% of the population must agree.
So, who is in the frame?
Various names have been suggested for the next ECB President, but little clarity here is likely to be seen until the next President of the European Commission has been agreed upon. Although such a role should be seen as pan-European and therefore agnostic over the nationality of the holder, appointees from The Netherlands, Italy and France have all held the post so far. This has led to some suggestions that the next ECB President should come from another state. Germany would be the natural choice, but with the country’s Manfred Weber seen as a front runner for the European Commission Presidency, Berlin may demure if this prize post can be secured. Because this nomination is likely to be driven by a battle between Germany’s Angela Merkel and France’s Emmanuel Macron, this FT article suggests that a German European Commission President would pave the way for a French ECB chief, seemingly as part of a trade-off.
In short, what does this mean?
Broad consensus is for the ECB to maintain its lax approach to monetary policy. The one country where opposition has been strongest against this stance is Germany, so avoiding a German ECB chief would again seem to support this idea.
This process goes to show the complexities involved in making these appointments which have the potential to influence monetary policy until well into the next decade. Depending on the outcome of the process, there’s the potential that the Euro will begin to react accordingly. Despite Mario Draghi now being set to conclude his tenure without having once tightened monetary policy, it’s worth adding that he seems set to leave a legacy that will be held in high regard for years to come. His stewardship has helped steer the Eurozone away from the dark days of the financial crisis and keep the single currency intact. Regardless of who takes on the role next, they have big shoes to fill.
