But with a surprise announcement last month that he will step down in 2003 , one year later than expected , Duisenberg asserted his independence while giving European leaders the chance to plot an orderly succession. The early signs, however, raise doubts about how neat the transition will be.
Duisenberg was named president at an infamous European Union summit meeting in Brussels in May 1998: French President Jacques Chirac withheld his support for more than 12 hours before winning a pledge that the Dutchman would depart early to make way for Jean-Claude Trichet, president of the Banque de France. French officials maintain that the switch was to occur halfway through the eight-year term, in mid-2002.
Now Duisenberg, 66, has decided to stay until July 2003. But Duisenberg hasn’t snubbed Chirac; he’s done him a favor. The extra year should provide enough time for French magistrates to finish their investigation of possible wrongdoing at Crédit Lyonnais in the early 1990s, when Trichet supervised the bank as director of the French Treasury.
“If he is cleared, everybody will be happy,” a senior EU official says. “He is the best candidate. That’s what the markets think. That’s what the politicians believe.”
Right now EU leaders don’t want to consider other scenarios. For one thing, Trichet is respected for delivering low inflation and a strong franc in France. For another, there are few alternatives. The name of Jean Lemierre, president of the European Bank for Reconstruction and Development, was floated briefly last year, not because of Lemierre’s central banking experience , he has none , but because “he’s more or less in the international loop,” says Eric Chaney, a senior economist at Morgan Stanley.
French officials have taken informal soundings on Finance Minister Laurent Fabius and a predecessor, Dominique Strauss-Kahn, but neither man wants the job and other EU capitals are loath to see a French politician parachuted into Frankfurt. Chaney suggests an economist or academic in the Alan Greenspan mode , possibly Paul Champsaur, who runs the French statistical agency Insee, but the country’s administrative elite, which tends to promote its own, isn’t likely to go along.
The likelihood of a non-French successor to Duisenberg is even more remote. German Finance Minister Hans Eichel reiterated Berlin’s support for a French candidate after a meeting with Fabius in Paris last month, making clear that the original Franco-German bargain , a Frankfurt base for the ECB in exchange for a French president , remains intact.
With Trichet in limbo, EU officials have focused on filling another upcoming vacancy: the seat on the ECB executive board that will open when vice president Christian Noyer, a Frenchman, departs on May 31. In this case, EU political considerations rather than monetary expertise are likely to be decisive. Rodrigo Rato, the Spanish minister who chairs the group of finance ministers from the 12 euro countries, last month called for candidates from smaller EU countries. Austria, Greece, Luxembourg and Portugal promptly put forward their central bank governors. The head of Belgium’s central bank, Guy Quaden, removed his name in favor of his deputy, Peter Praet.
Many ECB watchers would prefer a choice between Praet, a former chief economist at the old Générale bank who would bring financial markets experience to the board, and Bank of Greece governor Lucas Papademos, a respected monetary economist. But Greece lacks political clout in the EU, and as a deputy Praet faces long odds against central bank governors like Yves Mersch of Luxembourg and Klaus Liebscher of Austria.
The political jockeying is understandable. The euro is the world’s only major multinational currency, and it’s vital that EU countries feel that they own a piece of the project. But the ECB faces major challenges: Should it take more risks for growth? Can Europe forge a better monetary-fiscal policy mix? Can the bank streamline its decision-making process? These issues appear to be playing little role in the succession process.
“It would be unfortunate if countries try to impose their national champion and we forget about the kind of board we want to have,” one EU central banker says. Unfortunate, but altogether too likely.
