The president of the ECB steps down next year. His successor will face the most demanding job in central bankingby Simon Tilford / September 12, 2018 / Leave a comment
The stability of the eurozone is almost now taken as given, its future secure. People who argued at the height of the crisis in 2011 that the currency union’s days were numbered tend to be portrayed as Cassandras or Eurosceptics ignorant of the complexities of European politics. This ignores the reality that it was the European Central Bank and its President, Mario Draghi, that saved the day, not the participating governments. And Draghi leaves office in just over a year. Should people again fear for the currency union’s future?
The eurozone did not survive because the crisis-hit countries cut public spending by enough to convince investors that they could remain solvent within the currency union. It survived because of President Draghi’s promise to do “whatever it takes” to save the single currency by purchasing as many government bonds as were needed to prevent banking systems collapsing, destroying the currency union.
Running the ECB is arguably the most demanding central banking job in the world. The eurozone comprises 19 integrated but independent economies with separate banking systems, and there is no eurozone budget to act as a macroeconomic stabiliser in times of economic crisis; responsibility for macroeconomic stability lies squarely with the central bank. The president needs to have serious political skills, intellectual heft, and an ability to act like a European rather than as a spokesperson for his/her home country. Draghi managed this adroitly.
The good news is that the German government is now pushing for a German to succeed Jean-Claude Juncker as President of the European Commission. As a result, it can no longer lobby for Jens Weidmann, President of the Bundesbank, to replace Draghi; Germany could not hold two of the three top European posts simultaneously (the other being president of the European Council). Weidmann was a vocal opponent of the ECB measures that stabilised the eurozone. He argued that the crisis countries’ problems were wholly the result of their own failures rather than the result of complexities of financial and economic interaction within the eurozone, including excessive German investment in Spain and other eurozone members in the run-up to the financial crisis. He pursued the perceived interests of his home state assiduously, opposing any measure that might have meant German taxpayers helping to underwrite sovereign or banking sector risk…