Merkel cements Draghi's ECB chances: analysts

11th May 2011, Comments 0 comments

Chancellor Angela Merkel cemented on Wednesday the chances of Italian Mario Draghi becoming the next head of the European Central Bank, one of the toughest central bank jobs in the world, analysts said.

"Germany could back his candidacy for the position of ECB president," Merkel told Die Zeit in an interview.

Barclays Capital managing director Julian Callow told AFP that Merkel's backing "is the thing that we've been waiting for."

German Finance Minister Wolfgang Schaeuble had suggested previously that he too would like to see Draghi take over at the ECB when Jean-Claude Trichet of France steps down in October.

The ECB is in the midst of a series of crisis arising from the global financial meltdown.

Eurozone finance ministers are expected formally to recommend Draghi next week ahead of a likely decision by European Union heads of state and government in June.

"If there were any doubts that the deal was not done yet, I think this should rule them out," ING senior economist Carsten Brzeski told AFP in reference to Merkel's comment.

She also told Die Zeit that Draghi was "a very interesting and experienced figure" whose positions on monetary stability and the 17-nation eurozone economy in general were close to her own.

The German chancellor had previously remained silent on the question, though French President Nicolas Sarkozy expressed his support for the Italian in late April.

It is widely understood that a successful candidate would have to have the backing of the two biggest eurozone economies.

But as Brzeski noted: "You had Sarkozy stealing the show actually by indirectly crowning Draghi a couple of weeks ago, so what alternative was left for Merkel?"

Berlin had no viable candidate of its own after former Bundesbank president Axel Weber announced his resignation in February.

If Draghi is confirmed, ECB executive board member and fellow Italian Lorenzo Bini Smaghi will probably step down, creating a place for France to name someone else to the central bank's highest spheres.

Draghi, currently head of the Italian central bank, has emerged as the most qualified candidate though it would mean the ECB has both a president and vice president from southern European countries.

A former Goldman Sachs executive, Draghi is already a member of the ECB governing council and has key experience in international finance as head of the Financial Stability Board, a post he has held since 2009.

"He has the intellect, the experience, the leadership, the judgement, the communication skills that (would) collectively make him an exceptional president of the ECB," Callow said.

Draghi's public support for ensuring that eurozone inflation remains in check and that governments respect strict fiscal guidelines has also been crucial in garnering support from Germany.

But Callow said the Italian might find himself at odds with Berlin over the possible restructuring of debt by eurozone members such as Greece, an issue which has "been considered off limits most vehemently by the ECB board."

The central bank fears such a move could cause borrowing costs to soar for other heavily indebted eurozone countries like Ireland and Portugal.

"That will be an important transistion for Draghi to manage," the Barclays economist noted.

He cited the ECB's inevitable "move back towards a more normal system of support" for troubled eurozone members as another key challenge for Draghi.

Meanwhile, Brzeski noted with bemusement that the quote expressing Merkel's support for Draghi remained in the conditional.

"There is no reason to tip-toe while all the others are already close to the finish line," he said.

© 2011 AFP

0 Comments To This Article