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Draghi Succession Too Hung Up on Personalities, Jefferies Says

Draghi Succession Too Hung Up on Personalities, Jefferies Says

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Investor focus on who will succeed Mario Draghi as president of the European Central Bank may be missing the broader challenges the institution is set to face, according to Jefferies International economist Marchel Alexandrovich.

“Is the market getting too hung up on the personalities, rather than seeing the bigger picture?” Alexandrovich said in a note on Thursday. “Over the coming year, no matter who is in charge, it’s entirely possible that the ECB undertakes a fundamental review of its remit and its policy tools.”

Policy makers are beginning to ponder ways to potentially improve central bank management of the economy in the post-crisis world. The Federal Reserve has started a year-long framework review, while a Swedish government-appointed committee is set to deliver its findings on the Riksbank’s mandate later this year. Finland’s Olli Rehn, one of the contenders to take over from Draghi, has argued for a revamp of the ECB’s policy structure, though with limited traction so far.

Draghi Succession Too Hung Up on Personalities, Jefferies Says

Alexandrovich highlights the issues of lower market expectations on inflation, the ECB’s price target and the constraints of its current quantitative easing parameters in case of a new crisis as among the questions that “will need to be addressed whoever ends up replacing Draghi.”

The race to succeed the Italian in November remains wide open, with at least five candidates in the running. In addition to Rehn, frequently cited contenders include Bundesbank President Jens Weidmann, Bank of France Governor Francois Villeroy de Galhau, Rehn’s predecessor as Finnish central bank chief, Erkki Liikanen, and ECB Executive Board member Benoit Coeure, another Frenchman. European leaders will determine the EU’s top jobs, including Draghi’s succession, as part of a bargaining process that kicked off this week.

“While the markets will certainly be more anxious if the review process is led by Weidmann as opposed to some of the other candidates on the radar, it’s naive to think that the next eight years of ECB presidency will look anything like the past eight years,” Alexandrovich said.

Draghi Succession Too Hung Up on Personalities, Jefferies Says

--With assistance from Christopher Condon.

To contact the reporter on this story: Zoe Schneeweiss in London at zschneeweiss@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Lucy Meakin, Stuart Biggs

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