ADVERTISEMENT

Weidmann Hits French Roadblock on Path to Replace Draghi at ECB

Weidmann Hits French Roadblock on Path to Replace Draghi at ECB

(Bloomberg) -- Jens Weidmann may struggle to pass the test that France’s finance minister is setting for prospective successors to European Central Bank President Mario Draghi.

In a rare foray on the matter this week, Bruno Le Maire lavished praise on the Italian incumbent for quantitative easing, and suggested France would want someone with similar “courage” as a replacement. That may be bad news for the Bundesbank chief, who, as a critic of Draghi’s stimulus program, hardly represents the kind of continuity the minister seems to be looking for.

Weidmann Hits French Roadblock on Path to Replace Draghi at ECB

“Draghi’s term has changed deeply the approach to conducting monetary policy in the euro zone,” said Bruno Cavalier, economist at Oddo BHF. “The only candidate who would represent a break from that is Weidmann.”

Negotiations on the ECB succession will be conducted for France by President Emmanuel Macron rather than Le Maire. However, the minister’s comments underscore the difficulty Weidmann faces in convincing people that he could really change and do so credibly, despite the German’s hints at his openness to adapt to the responsibilities of a new office.

“I’m sure Le Maire was aiming at Weidmann,” said Dirk Schumacher, economist at Natixis. “It’s clear that Weidmann has an uphill battle to fight because he’s perceived, rightly or wrongly, as being too dogmatic.”

The succession is likely to remain unresolved until after the European elections in late May, when it will be addressed as part of a carve-up of key European Union positions including the presidency of the Commission. Draghi leaves office at the start of November.

Weidmann Hits French Roadblock on Path to Replace Draghi at ECB

Le Maire’s intervention on Wednesday, in response to questions in parliament, is the most outspoken expression yet of the evolving view of the French administrative class on the impending personnel shake-up. Macron hasn’t yet shared his views publicly.

“The economic situation of the euro zone wouldn’t be the same if there would have been somebody else, different from Mario Draghi, who would have had less courage and less lucidity,” Le Maire said. “The men and women who fill these posts is indeed a completely essential matter. France will be determined to defend its interests.”

Weidmann, formerly seen by economists as the favorite to replace Draghi, saw his prospects wane when compatriot Manfred Weber was put forward by the European People’s Party as their candidate for European Commission president. Still, he received a boost at the start of this year when Germany decided not to push for the job of ECB chief economist instead and as Italy’s finance minister, Giovanni Tria, confirmed a thawing in his country’s view of the Bundesbanker.

Weidmann Hits French Roadblock on Path to Replace Draghi at ECB

Other potential candidates for Draghi’s job include Bank of France Governor Francois Villeroy de Galhau, ECB Executive Board member Benoit Coeure, Bank of Finland Governor Olli Rehn, and his predecessor in that job, Erkki Liikanen.

Despite any French doubts, the 50-year-old Weidmann remains a formidable contender, enough to persuade some observers that he might still prevail if German Chancellor Angela Merkel decides to push for the appointment of her former economic adviser.

“A German ECB president is what domestic voters expect from Europe’s most powerful politician of the last decade,” Jacob Funk Kirkegaard, senior fellow at the Washington-based Peterson Institute for International Economics, wrote in an article this week. “Despite Germany’s status as Europe’s biggest economy, no German has held the position of ECB president, the most powerful economic job in the region. It is now politically palatable to say ‘it’s Germany’s turn now.’”

Weidmann Hits French Roadblock on Path to Replace Draghi at ECB

To contact the editor responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss

©2019 Bloomberg L.P.