German woman with bank expertise front-runner to join ECB board
FRANKFURT (Reuters) - Sabine Lautenschlaeger, a German bank supervision expert with no monetary policy record, is an early favorite to replace Joerg Asmussen on the ECB's executive board after his decision to leave early to spend more time with his family.
Lautenschlaeger, 49, who was praised by German Finance Minister Wolfgang Schaeuble on Monday as a worthy candidate to replace Asmussen, is vice president of the Bundesbank and analysts said her appointment could herald a more united, hawkish German stance within the ECB's rate-setting council.
Asmussen acted as a balancing force in his two years at the European Central Bank, siding with President Mario Draghi in a dispute with the Bundesbank over bond-buying at the height of the euro crisis, but more recently opposing the Italian's push to cut interest rates.
"I would expect there to be a bit of a shift to a more hawkish side of decision-making, but it would not tip the balance from doves," said Elwin de Groot, an economist at Rabobank.
The ECB surprised with an interest rate cut in November which around a quarter of the 23-strong Governing Council spoke out against, with Bundesbank chief Jens Weidmann leading the opposition.
Lautenschlager's addition to that group will not alone be enough to tilt the balance.
A Reuters poll of economists last week found 25 of 40 said the ECB's next salvo will be to prime banks with more cheap cash, probably early next year.
Asmussen's departure, to take a less prestigious post as state secretary at the German labor ministry in Berlin, where his partner and two daughters live, is the third early exit by a prominent German central banker in as many years.
But unlike former Bundesbank president Axel Weber and board member Juergen Stark, who stepped aside because they disagreed with ECB crisis-fighting policies, Asmussen's reasons for leaving appear to be personal.
In addition to Lautenschlaeger, other names being mentioned for the post include Elke Koenig of German financial supervisor Bafin and Claudia Buch, president of a leading economic institute in the eastern city of Halle. But Schaeuble's public vote of support, gives Lautenschlaeger a strong edge.
The Bundesbank, Bafin and Halle institute all declined to make the candidates available for comment.
Germany is under pressure to nominate a woman for the position because every member of the ECB's 23-strong governing council, which includes the six-seat board and 17 national central bank heads, is a man.
In protest at the lack of women at the ECB, the European Parliament delayed approving the appointment of Luxembourg's Yves Mersch to the executive board last year.
In the 15-year history of the ECB, only two women - Finland's Sirkka Hamalainen and Austria's Gertrude Tumpel-Gugerell - have served on the board.
Lautenschlaeger has spent her career focused on banking supervision and regulation, a fortuitous background as the ECB is due to take over responsibility for supervising European banks one year from now.
After her law studies, she joined German banking supervisor Bafin in 1995, before switching to the Bundesbank in 2011, a role in which she already accompanies President Jens Weidmann to rate meetings.
She is also a member of the Basel Committee for Banking Supervision, which draws up global banking regulations.
In public, she has concentrated on regulation and supervision and said little about monetary policy but has been among those who have warned about potential conflicts of interest when the ECB has responsibility for both monetary policy and banking supervision.
She has cautioned that low interest rates over a prolonged period of time could hurt the profitability of banks and, along with Weidmann, argued against treating government bonds as risk-free assets in bank books.
Asmussen was seen as the consummate pragmatist when he replaced Stark in January 2012. As a member of the board, he has said he sees himself primarily as a European, rather than German, policymaker.
Still, over the past year he has taken more hawkish stances, repeatedly stressing the limits of monetary policy. He was the only one in the 23-member Governing Council to vote against an interest rate cut in May, and one of six to do so last month.
Despite this shift, Asmussen has taken care to avoid the kind of open clashes with Draghi that Weidmann had last year after the Italian president vowed to do "whatever it takes" to save the euro zone.
In frequent interviews and public appearances, he has mostly toed the ECB line and explained its policy to often-skeptical Germans.
"Should (Lautenschlaeger) position herself behind Weidmann, this would weaken the German position," said Christian Schulz of Berenberg Bank. "We need someone who explains ECB policy differently from Weidmann."
(Writing by Noah Barkin, editing by Mike Peacock)