Germany Starts Hunt for a Central Banker Who Can Stick With ECB

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Germany, a founding member of the euro area and by far its biggest economy, is hunting for someone who can stick with a top job at the European Central Bank.

After Sabine Lautenschlaeger became the third consecutive German to leave the ECB’s Executive Board before her term was finished -- stunning almost all her colleagues, who hadn’t been forewarned -- Angela Merkel’s government is pressing its case to fill the vacancy. Germany, France and Italy have always had a seat on the six-member body that designs monetary policy.

Key lawmakers from Merkel’s Christian Democrats, speaking on condition of anonymity, said a female candidate is likely, and mentioned Isabel Schnabel, an economic adviser to the government, or Bundesbank Vice President Claudia Buch. Lautenschlaeger is the only woman on the ECB’s 25-person Governing Council.

But hovering over the whole process are questions of political affiliation and German frustration with years of negative interest rates. The administration must decide whether it wants a traditional central banker, a politician with economic heft, or maybe an academic steeped in policy.

Bundesbank Bulwark

The Bundesbank, just 5 kilometers (3 miles) from the ECB in Frankfurt, is the traditional place to start. It was the blueprint for the euro zone’s currency guardian and provided the institution’s first two chief economists in Otmar Issing and Juergen Stark. Lautenschlaeger was the Bundesbank’s vice president.

It’s also a hotbed of discontent with loose policy though. Stark quit in 2011 after disagreeing with the institution’s bond-buying program. On the ECB’s Governing Council, made up of the board and the national central-bank chiefs, Bundesbank President Axel Weber resigned the same year. Current head Jens Weidmann has been a persistent critic of ECB President Mario Draghi’s policies, leading to friction between the two men.

“The natural breeding ground has changed and it doesn’t necessarily need to be the Bundesbank this time,” said Carsten Brzeski, chief economist at ING-DiBa AG in Frankfurt. “I’d definitely go for someone with a strong economic background, but also if you want to have influence on the next ECB, it’s important to have a person who’s less of a hawk and more cooperative in his or her approach to policy.”

Should Germany decide to nominate a woman, the Bundesbank does present an option in Buch, who’s been there five years. The 53-year-old economist already attends ECB Governing Council meetings and is responsible for overseeing financial stability in Germany.

Political Priorities

Another option is to look among Germany’s political classes. That was the route taken with Joerg Asmussen, a finance ministry official at the time who joined the ECB board in 2012 and took on the role of international cooperation. He also left early, serving just two years of his eight-year term to return to government.

That precedent could cast the spotlight on someone like Jakob von Weizsaecker, the finance ministry’s chief economist and a former European Parliament lawmaker. Party politics would need to be overcome as he’s affiliated with the Social Democrats, who run the ministry in Germany’s coalition.

Academic Advisers

Alternatively, the government could consider tapping one of the experts from its council of economic advisers. Schnabel is a University of Bonn economist and an expert on financial supervision and banking regulation.

Volker Wieland, a colleague of Schnabel’s on the council and a professor at Goethe University in Frankfurt, could be in the running. His resume includes a PhD from Stanford and five years at the Federal Reserve. He’s the host of an annual conference called the ECB and Its Watchers, which draws the central bank’s big hitters.

Economic research centers such as the Ifo institute in Munich or ZEW in Mannheim, headed by Clemens Fuest and Achim Wambach respectively, might get a cursory consideration.

Another name is Marcel Fratzscher, who runs the DIW Berlin think tank and was previously the head of International Policy Analysis at the ECB. His hurdle might be his frequent criticism of the German economic model and his defense of Draghi’s policies -- stances unlikely to win him plaudits in conservative German circles.

In the private sector, Elga Bartsch is head of macro research at BlackRock Inc., with a long career of covering the euro-area economy and markets. A paper she co-wrote recently with two former central bankers argued for more explicitly coordinated monetary and fiscal policy, a radical version of what both Draghi and his successor from Nov. 1, Christine Lagarde, are advocating.

It’s not clear how such a world view would go down with the German government, which has so far resisted calls to step up its own spending and has a deep culture of separating monetary and fiscal policy. A different approach may be to put someone forward who will continue to push the German line that excessive monetary stimulus is counterproductive.

“A year from now there could be a debate within the council over stopping QE,” said Richard Barwell, head of macro research at BNP Paribas Asset Management in London. “Parachuting in a highly respected and persuasive expert on monetary policy who is able to challenge the dovish arguments of colleagues could tip the balance in that discussion.”

--With assistance from Samuel Dodge.

To contact the reporters on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net;Birgit Jennen in Berlin at bjennen1@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Fergal O'Brien

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