In light of a visibly recovering European economy, the European Central Bank currently faces the challenge of having to gradually adjust its previous monetary policy orientation. However, as inflation continues to persist at a very low level, monetary stimulus is likely to be reduced only very gradually. As if this balancing act was not enough of a challenge, four out of the six members of the Executive Board of the ECB will need to be replaced within the coming two years. The eight-year mandate of ECB vice president Constancio ends already in roughly four months’ time. Additionally, ECB chief economist Praet, president Draghi and Council representative Coeuré will all be resigning by the end of 2019.
Representatives of the European Council decide in a formal process on who will succeed the outgoing Executive Board members. However, the European Parliament and the ECB Governing Council also intend to conduct hearings prior to this. As is always the case with high-level European posts, a compromise has to be found between the different interests of the member states. The appointment of the new president of the ECB is a particularly sensitive issue in this respect. Bundesbank president Weidmann has been considered a possible candidate for quite some time. Even so, some southern European countries have already voiced their reservations about his candidacy, in response to his critical stance on the bond purchase programme.
A win by Weidmann in the race for Draghi’s successor would undoubtedly strengthen the hawkish camp in the ECB Governing Council. Even so, we find the concerns about a shift towards a fundamentally more restrictive or dogmatic monetary policy somewhat excessive. In our view, continuity will be guaranteed by the fact that a new ECB president does not decide alone on the line of approach the central bank will take in the future. The ECB has always emphasised in the past that monetary policy decisions must be taken by consensus among the Governing Council representatives. Ultimately, general economic parameters continue to represent the most important factor in determining future monetary policy.