He took office eight years ago when my gym buddy, Arnold Schwarzenegger, was flexin’ his biceps in Terminator 3. Everyone wanted Jean-Claude to work his magic on the region as soon as possible. They even made him start even before his predecessor, Wim Duisenberg, finished his term!
Too bad for the euro zone leaders, they have to bid “Au Revior!” to Trichet soon, before he hits the Caribbean for his well-deserved vacation when his non-renewable term expires in October.
So who’s gonna run the show when he leaves? Here are five among those in the running towards becoming the next big boss of the ECB:
Axel Weber presents an impressive resume of central banking experience, being the top dawg of Deutsche Bundesbank at only 53 years old. His reputation as a hawk has also made him a favorite presidential candidate. Remember that the ECB’s mandate is to keep inflation on the down low.
It seemed like a lot of our European chaps had the Weber-fever. That is, up until last Wednesday, when all of a sudden, Germany’s number one bet announced that he may not pursue the job anymore. Boo hoo!
A handful of naysayers sure are giddy about the idea of Weber pulling out of the race though. They say that if his public opposition to the ECB’s bond-buying program last year is any indication of his strong anti-inflation stance, debt-ridden EZ nations may possibly face more pressure from the ECB under Weber’s administration.
Arguably Weber’s biggest competition is Italy’s central bank governor, Mario Draghi, who also chairs the Financial Stability Board.
Sounds so profesh, right? Basically, he has been coordinating with other central bankers to formulate rules of global finance since the 2008 financial crisis.
There’s one problem with his resume though. It indicates that he was once a vice chairman in Goldman Sachs and some are skeptical that conflicts of interest may arise if he’s in power.
Germany’s second bet is the head honcho of the European Financial Stability Facility. Also having worked as a European Commission official, there is no question that Herr Regling knows his Economics 101! But skeptics ask, “Without any experience working in a central bank, will he be able to run the ECB?”
Now, if there’s anyone who can say that he has seen it all, it’s got to be this guy! No one has been on the ECB’s governing council longer than Yves Mersch. And FYI, he has also been the chairman of Luxembourg’s central bank ever since it was established in 1998!
But because the European Union is all about equal representation, his prospects of becoming the next ECB president could be dampened by another Lëtzebuerger, Prime Minister Jean-Claude Juncker, who holds a top position in the region as the chairman of Eurogroup finance ministers.
Last and probably the biggest underdog in the candidacy is former European Commissioner from the Land of the Midnight Sun, Erkki Liikanen.
Just like Mersch, Finland’s central bank governor may lose his shot in heading the ECB because Olli Rehn already represents Finland in the EU as the European Economic and Monetary Affairs Commissioner.
What does it take to be the next Trichet?
It might surprise you to know that the bank leader’s stance will have very little impact on the ECB’s monetary policy compared to the Federal Reserve. Thus, these candidates won’t have to worry so much about shedding their dovish or hawkish feathers to get the job.
Why so, you ask?
Well, it’s because the Federal Reserve works in such a way that Big Ben Bernanke has a much bigger say in the bank’s decisions. Meanwhile, the ECB has a 23-member governing council, representing central banks all over the region, that calls the shots.
Since it ain’t no secret that while some countries in the euro zone are cruisin’ through the path of recovery like a G6 and others aren’t, what’s important is for the next ECB leader to be able to achieve a consensus among the members. Whoever Trichet’s successor will be, has to boost confidence in the bank as it plays a more crucial role in the region’s struggle to claw out of the rut of sovereign debt.
More importantly, I think that in deciding who the next ECB President will be, euro zone leaders will have to ask themselves, “Can he convince everyone that the euro is worth fighting for?”