DOES WEBER REALLY WANT TO SUCCEED TRICHET ? / THE FINANCIAL TIMES COMMENTARY & ANALYSIS ( HIGHLY RECOMMNDED READING )

Does Weber really want to succeed Trichet?


By Wolfgang Münchau

Published: October 17 2010 20:13

A senior German official had this to say about the succession to Jean-Claude Trichet at the helm of the European Central Bank: “Only one person can now stand in the way of Axel Weber, and that is Axel Weber.”


Last week, it looked as though Axel Weber got in the way.


In one sense, it is refreshing to see the president of the Bundesbank sticking to his guns by criticising virtually all the important decisions he and his colleagues have taken in recent months and to criticise the decisions they are likely to be taking in the near future. Like Martin Luther, Mr Weber just stands there and can do no other. I disagree with almost everything he has been saying in recent months, but I cannot hide my respect for his gumption.


Mr. Weber wants the ECB to end the bond-purchasing programme, which he alone had voted against. The ECB will not follow him. He advocates an early exit from low interest rate policies – and I am not sure he will prevail on that point either.


Perhaps most shockingly, he favours the eventual phasing out of the European Financial Stability Facility at a time when a consensus is emerging that the EFSF should evolve into a permanent institution of the European Union. He also mocks the idea that the new fiscal sanctions regime against deficit countries should be subject to continued political influence. It is hard to find someone who is more out of tune with the EU’s majority view on economic governance.


I have three explanations for his behaviour. First, Mr Weber may be so sure of getting the job that nothing he says or does matters. That would contradict the assertion made at the top of this column. Maybe Mr Weber has better information. Perhaps he has received assurances. Angela Merkel, the German chancellor, certainly put her political weight behind his candidature. There were unconfirmed news reports in May that she had linked German support for the EFSF to support for Mr Weber’s candidacy. I think these reports are probably not true – or if they are, the truth is more subtle than stated. But since Germany is the ultimate guarantor of the EFSF, it would be hard, politically, to brush aside Berlin’s own candidate, let alone to push through a candidate against Germany’s will. So this is really a battle for Mr Weber to lose. He is clearly the favourite to succeed Mr Trichet next year. But even so, he cannot be totally certain of success.


A second explanation is that Mr Weber may actually not care about getting the job, or he may not care enough.


Third, he may care about getting the job, but is not good at financial diplomacy.


I suspect it is either two or three.


I have heard the view expressed that none of this matters, since a Weber presidency would have no impact on the distribution of hawks and doves on the ECB’s governing council. If Mr Weber were to become the ECB’s president, Jürgen Stark, a hawkish member of the executive committee, would presumably be offered Mr Weber’s job at the Bundesbank. In other words, one hawk gets swapped for another and the balance of terror is maintained.


I think this view totally misjudges the dynamics of the process and underestimates the role of the ECB’s president. Mr Trichet managed to play an instrumental role during the crisis, because he was able to seek a consensus within the governing council, to communicate that consensus and to engage in a political dialogue with the European Council without sacrificing the ECB’s independence.


I can somehow not see Mr Weber in any of these roles. I cannot see him communicating a consensus he does not believe in. If elected, he would have to defend the ECB bond-purchase programme – which is bad enough for him – and do so with a straight face.


Mario Draghi, the governor of the Bank of Italy, would in many ways be a more suitable candidate for that set of tasks. Like Mr Trichet, he has had a long experience in government. As chairman of the Financial Stability Board, he is probably the most authoritative figure in global financial reform and he knows how to engage with politicians without sacrificing independence. He has been loyal to the ECB’s governing council, not criticising its decisions in public.


If this were to turn into a fight between Mr Weber and Mr Draghi, the likely winner would be some lucky third candidate – nobody knows who, but most probably a northern European with a hawkish mindset. There is a long tradition in the EU that the top jobs do not go to those best qualified, but to those who happen to have the right nationality at the right time.


Does any of this matter to the rest of the world? It does because the decision will determine the direction of European monetary policy for the rest of this decade. A successful Weber presidency would pull the eurozone even more in a German direction and widen the transatlantic economic policy crack. An unsuccessful presidency would be a disaster for everybody. In the end, I am still not entirely sure why Mr Weber would want this job.




Copyright The Financial Times Limited 2010