LONDON (Reuters Breakingviews) - Mario Draghi’s successor may not be the most important appointment at the European Central Bank in the year ahead. Most of those in the running to replace the Italian as president lack his creativity in tackling existential problems, such as a breakup of the euro. Others will have more scope to sway the debate. Ireland’s Philip Lane, who is in pole position to take over as chief economist from Peter Praet, is the sort of freethinker who would have outsized influence, especially in the next economic downturn.
Draghi’s departure from the ECB, scheduled from the end of October, removes a key figure. Bank of France Governor Francois Villeroy de Galhau, Finland’s former central bank chief Erkki Liikanen or his replacement Olli Rehn, and Klaas Knot of the Dutch central bank are all potential successors. Benoît Coeuré, the Frenchman who is already on the ECB’s Executive Board, and Deutsche Bundesbank President Jens Weidmann are also contenders. However, ECB rules may prevent the former from throwing his hat in the ring while the latter may be too divisive given his past criticisms of Draghi’s policies.
Besides, merit will not be the decisive factor. National haggling over who gets the job will be inextricably linked to other vacancies, such as the next president of the European Commission. And while Draghi’s potential replacements are respected policymakers, few have so far matched his inventiveness.
That is why Lane would be an interesting choice as chief economist. The former academic supports the creation of so-called European Safe Bonds, synthetic IOUs that would be backed by the sovereign debt of all European Union countries. The idea, designed to break the “doom loop” between banks and national governments, has drawbacks. Still, it shows the sort of ingenuity that will come in handy when the euro zone economy inevitably slows.
With official rates still in negative territory and likely to rise slowly, there will be little room to cut when stimulus is next needed. More bond buying or long-term loans may not do the trick. Lane is more likely to dream up a cunning scheme to stimulate the economy. The sidekick may matter more than the next president — unless he turns out to be the dark horse that gets the top job.
- This is a Breakingviews prediction for 2019. To see more of our predictions, click reut.rs/2R6H5pG