The eight-year tenure of ECB President Mario Draghi will come to an end in late October, and it remains unclear who will succeed the Italian in the top ECB job. But irrespective of who ultimately takes over the ECB reins in November, we are anticipating a continuation of the current ultra-expansionary monetary policy. Why? Because the direction of monetary policy of the Eurozone’s central bank is not set by the President alone, but by the Governing Council as a whole. In other words, even the staunchest monetary policy hawk would not be able to bring about any immediate change in direction.
However, the next few weeks will involve not just a search for a successor to ECB President Draghi, but also a replacement for EU Commission President Jean-Claude Juncker, who is likewise nearing the end of his term. According to an unwritten rule, these two key EU positions should not be held by representatives of the same European country at any one time. As the European Parliament is expected to vote on the next EU Commission President at the start of July, the outcome of this game of “personnel poker” will have repercussions for the appointment of the new ECB president.
In addition to Bundesbank President Jens Weidmann, two French candidates (Franҫois Villeroy de Galhau/Benoît Coeuré) and two Finns (Olli Rehn/Erkki Liikanen) are being touted as potential successors to Draghi. According to surveys, French central bank head Villeroy de Galhau is currently the front runner to fill the position of ECB President. de Galhau has recently stressed that he would do everything in his power (“whatever it takes”) to save the euro, and is therefore the “continuity candidate” with regard to the ECB’s monetary policy course. By contrast, Bundesbank head Weidmann is viewed as an outsider to succeed Draghi. Even if he has recently come to accept the ECB’s bond purchase programme, financial market players continue to have reservations about Weidmann. Specifically, there is a fear that he would not respond to a crisis scenario with a “whatever it takes” speech. If none of the candidates from Europe’s two largest economies makes it through, a Finnish ECB President would be a feasible compromise. In such a scenario, financial market participants see former ECB Governing Council member Liikanen as a possible option.