The days of Mario Draghi as head of the European Central Bank are coming to an end. Next October, Draghi will cease to be one of the most powerful central bankers in the world after eight years in office. A hero for some, a villain for others, everyone agrees that his mandate will go down in history as one of the most decisive in the short history of the euro as he was forced to cope with a crisis that almost breaks up the Eurozone only a few years after its inception.
Jens Weidmann is one of the frontrunners to take up Draghi’s highly coveted position. The President of the Bundesbank has been a critic of unconventional monetary-policy tools since Draghi took over in 2011. He was the only member of the ECB’s Governing Council who opposed the purchase of sovereign debt in secondary markets to assist financially-distressed governments (the so-called Outright Monetary Transactions).
Similarly, he publicly showed his disagreement with the implementation of quantitative easing in 2015. However, he has recently softened his critical position with Draghi’s policies in order to attract the necessary support to become the head of the Eurozone’s monetary authority next October.
The governor of the Bank of Finland, Olli Rehn, also has a good chance of becoming the next President of the ECB. The Finnish politician has experience in the realm of European politics as he served as Commissioner for Economic and Monetary Affairs and the Euro between 2009 and 2014. During his mandate, he was a firm supporter of fiscal austerity and balanced budgets to tackle the Eurozone’s debt crisis.
The Economist has publicly supported the candidacy of Olli Rehn’s compatriot Erkki Liikanen to replace Draghi as head of the ECB. Liikanen preceded Rehn as Governor of the Finnish central bank. Prior to that, he was European Commissioner twice and Minister of Finance of his country. He’s known for being a pragmatic and moderate candidate.
The current Governor of the Bank of France, François Villeroy de Galhau, and Executive Board member Benoît Cœuré are also in the race to replace Draghi. Villeroy de Galhau is probably the candidate with best prospects, whereas Cœuré is considered one of the minds behind ECB’s asset purchase programs. Both profiles represent continuity with Draghi’s policies.
Whoever takes over from Draghi will need to gain the support of a majority in the Governing Council in order to carry out monetary policy. Despite the significant influence of ECB’s President, important monetary-policy decisions ultimately depend on national central banks, which have a majority of seats in the Council.
Should Jen Weidmann not be elected, potential opposition to the new President will likely come from the Bundesbank, which has always been sceptic about the use of unconventional tools. The German central bank has repeatedly showed its concerns with the effects of the, in their view, excessively loose monetary policy carried out in the last years.
Draghi’s successor will thus have to reach a broad consensus among his fellow central bankers if he aims to delve deeper into the unexplored territory Draghi decided to venture in 2012.