Markets jolted by ECB speculation

9th February 2011, Comments 1 comment

Speculation over the next European Central Bank president jolted financial markets Wednesday as media reports said German central bank chief Axel Weber was out of the running.

Weber had been tipped as one of the most likely successors to Frenchman Jean-Claude Trichet when he steps down in October.

But reports said Weber, who has irritated some European Union (EU) figures, was no longer "available" and that he would give up his Bundesbank position to join Deutsche Bank, Germany's largest private bank.

The ECB succession comes at a crucial time for the 17-nation eurozone as it works to regain the confidence of financial markets owing to debt crises in two member states, Greece and Ireland.

The Bundesbank declined to comment, and said "rumours" that it would release a statement later on Wednesday on Weber's future were untrue.

Deutsche Bank also refused to comment.

A source close to the German central bank told AFP Weber had just "signalled to those close to him that he would not necessarily seek a second mandate as head of the Bundesbank.

"He sees no reason to express himself personally" on the subject, the source said.

As speculation swirled in Frankfurt, the euro plunged briefly against the dollar before rebounding to trade around 1.3648 dollars, while the stock exchange's headline DAX index gave up early gains and was slightly negative in early afternoon trading.

Barclays Capital economist Julian Callow said that regardless of who was finally named to head the ECB, "we would not envisage a significant change in its strategy or reaction function.

"Indeed, the lesson of the ECB's history so far is that while the personnel may change, the institution has stuck firmly to its clearly-defined mandate" of ensuring that eurozone inflation was held below but close to two percent.

Weber has rankled several EU chiefs, who are due to select the next ECB president in the coming months, with comments criticising the bank's purchases of eurozone government debt.

In late October, the Bundesbank chief vowed to remain true to his principles even if it meant he was not chosen as the next head of the ECB.

"If that's going to have implications for my future career, then I'd be happy to live with those consequences," he told an event in Stuttgart, southwestern Germany.

Several alternative candidates have been mooted in recent weeks, including Luxembourg central bank head Yves Mersch, Finnish central bank governor Erkki Liikanen, and Klaus Regling, head of the European Financial Stability Facility.

Another name floated initially as a front runner was that of Italian central bank chief Mario Draghi.

But a key factor weighing against Draghi is that the ECB vice president is Vitor Constancio of Portugal, another southern country. European institutions often strive for geographical balance among its senior positions.

It is also often suggested the ECB president will be chosen from one of the larger eurozone countries.

Meanwhile, a poll commissioned by the Financial Times this month found that a German candidate would have more support across the continent than any other.

Regling is German.

The FT/Harris poll found that in France and Spain, more of those surveyed, 26 percent, would prefer the ECB be run by a German than by one of their own when Trichet steps down.

In Germany itself, more than one-third preferred a domestic candidate, but even in Italy, 25 percent would be happy with a German, slightly less than the 26 percent who said they would like an Italian to hold the position.

Callow said: "If Mr Weber were to resign from the Bundesbank to a new role, then in our view this would significantly elevate the chances of Mr Regling to succeed Mr Trichet as ECB president."


© 2011 AFP

1 Comment To This Article

  • avsec bostjan posted:

    on 10th February 2011, 02:00:08 - Reply


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