Germany with ECB headache as Weber quits race

11th February 2011, Comments 0 comments

Bundesbank boss Axel Weber pulled out of pole position in the race to become the next European Central Bank chief on Friday, dashing Berlin's hopes of having a German in the post for the first time.

After days of speculation, Axel Weber told Chancellor Angela Merkel in a meeting in Berlin that he would quit the German central bank on April 30 "for personal reasons," the government said.

"A successor will be named in the coming weeks," it said.

The 53-year-old Weber, seen as a hardliner on ECB policy and practice, was a front-runner and apparently enjoying solid government backing to succeed Frenchman Jean-Claude Trichet in October.

One government insider told AFP officials were in shock at Weber's "tragic" decision.

Trichet's successor will be only the third person to head the ECB, the world's most powerful central bank after the US Federal Reserve. The first was Dutchman Wim Duisenberg.

By not pushing to get one of its own in any top European position in recent years, Europe's economic powerhouse was widely seen as having its eye on the ECB presidency instead.

The head of the European Commission is Portuguese, the European Union's president a Belgian and its foreign policy chief is British -- Jose Manuel Barroso, Herman Van Rompuy and Catherine Ashton respectively.

"It always looked as if the entire focus was on securing the next ECB presidency, with Weber as the ideal candidate," ING economist Carsten Brzeski said.

Having a German succeed Trichet would enable Merkel to have her voice heard even more loudly and clearly as the ECB scrambles to cope with a crisis that has shaken the eurozone to its very foundations.

Last year, Greece and Ireland were forced to go cap in hand for bailouts worth tens of billions of euros (dollars) and investors fear that Belgium, Portugal and the much larger Spain and even Italy could be next.

This has gone down badly with German voters and Merkel, who faces the first of seven state elections this year on February 20, has set as her price fiscal austerity and much closer economic and fiscal cooperation in Europe.

But Weber has ruffled feathers in recent months with attacks on the ECB's contribution to fighting the crisis; the purchase of 76.5 billion euros' worth of government bonds.

According to media reports, a lack of backing from Berlin gave him cold feet on going for the ECB job. He is now rumoured to be considering a lucrative job at Deutsche Bank, Germany's biggest private bank.

And with only around eight months until Trichet steps down from the ECB helm, Berlin does not have an obvious candidate to parachute in as Weber's replacement.

The German most widely touted as an alternative, Klaus Regling, heads the eurozone's rescue fund but has no central bank experience.

"I think the market would not simply accept that an outsider gets the job,"

LBG economist Kenneth Broux said.

Weber's decision instead appears to leave the way clear for the man formerly seen as his main rival, Italy's Mario Draghi, to secure the job.

"From a technical point of view, he would probably be the most suitable candidate," UniCredit economist Marco Valli said, but his "main problem is his nationality."

Other possible candidates include Luxembourg's Yves Mersch and Finland's Erkki Liikanen.

Holger Schmieding at Berenberg Bank said that although Weber's departure was "rather embarrassing" for Merkel, investors have no need to worry about the ECB's future stance.

"I don't think that this is something that will have a lasting impact on either the Bundesbank, the ECB or the solution for the euro crisis," he told AFP.

© 2011 AFP

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