Macron to Make Biggest ECB Job Pick for Years at Bank of France

(Bloomberg) --

French President Emmanuel Macron must soon make the biggest decision for years to come on the makeup of the European Central Bank’s policy makers: whether to reappoint the Bank of France governor.

Francois Villeroy de Galhau’s six-year term expires at the end of October, and the head of state could determine as soon as this week if he should get another stint. Alternatively, Macron -- who already reshaped the ECB by successfully pushing to appoint the first female president, Christine Lagarde -- might opt to revamp it even further.

With Villeroy, 62, holding the seat granted to the euro area’s second-biggest economy at the Governing Council, the decision on his future is arguably the most significant before 2026, when governments must choose a successor to Vice President Luis de Guindos.

The case to reappoint Villeroy is that he has established himself as a safe pair of hands in France, and a distinctive and influential voice at the ECB. Taking the bolder option of a new governor has its attractions too, not least before a presidential election for an incumbent who took office on an anti-establishment ticket, and who might be keen to burnish that credential.

“The default option and the path of least resistance would be to have Villeroy for the second term,” said Frederik Ducrozet, an economist at Banque Pictet & Cie in Geneva who, as a student, attended classes taught by Villeroy at Sciences Po in Paris. “That was the case in the past, if you didn’t make any obvious mistakes.”

The Bank of France and Macron’s office declined to comment on the potential reappointment. 

Villeroy, a former chief operating officer at BNP Paribas SA, was selected by Francois Hollande, the French president Macron served under and then forsook to run for his own election in 2017. 

Rather than reappoint a male veteran of France’s bureaucracy, who is also the scion of a porcelain manufacturing dynasty, Macron could pick a woman such as OECD Chief Economist Laurence Boone, who succeeded him as an economic adviser to Hollande. She would then be the only female national governor in the 19-member euro area.

France has no shortage of other esteemed economists, including Benoit Coeure, a former ECB Executive Board member who now heads the innovation hub at the Bank for International Settlements. Macron recently appointed him to review the government’s fiscal stimulus.

Villeroy, a Strasbourg-born German speaker, has fashioned a distinctive voice for France at the ECB, one he says is rooted in pragmatism rather than a hawkish or dovish camp.

Villeroy has been largely supportive of Macron’s domestic agenda, crediting the president’s overhauls of labor laws with faster hiring, and encouraging his efforts to improve training and education. On fiscal affairs meanwhile, the governor has been less critical of French deficits than predecessors.

He has even held up his record of modernizing the two-century-old Bank of France as an example to follow as the French state responds to frustrations in public consultations after the Yellow Vest protests. 

Villeroy says his overhaul increased services, cut costs, and maintained a nationwide presence while reducing headcount from more than 12,000 when he arrived in 2015 to some 9,500 last year, fewer than Germany’s Bundesbank.

“We are making what citizens asked for in the Great Debate of 2019: a skilled public service close to the people, which is high performing and accessible,” Villeroy claimed in his 2021 book entitled Rediscovering Confidence in the Economy. “It’s possible, and that’s good news.” 

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