World Crisis Online

The great fear among the cerebral officials at the European Central Bank was always that the race to succeed Jean-Claude Trichet would descend into a chaotic, unseemly scramble in which the nationality of candidates and stereotypes counted more than economic or policymaking skills.

The wish in Frankfurt was simply to have the most competent candidate as the next ECB president. The risk was of a loss of credibility – a vital resource for central banks as they seek to combat inflation.

This week’s confusion as Axel Weber, Germany’s Bundesbank president, withdrew from the competition to take over from Mr Trichet at the end of October, has shown the selection process will certainly be messy, confusing and dictated by national politics. But it does not yet mean the end result will be bad.

As demonstrated this week, Mr Weber was not strong when it came to the self-discipline usually deemed essential for a central banker. He can act impulsively and is a poor communicator; he has still not declared formally that he will not run for the ECB, or how long he will stay at the Bundesbank, or whether he might take a job at Deutsche Bank.

Last year, the Bundesbank president confided to an interviewer that he admired Paul Volcker, the former US Federal Reserve chairman, who was “not a diplomat”. But Frankfurt is not Washington. The ECB has 1,500 employees from 27 countries who speak 23 languages. It works through consensus-based decision-making by its 23-strong governing council. It allows internal dissent, but expects loyalty once a decision is reached.

Mr Weber clearly undermined that principle when last year he publicly criticised the the ECB’s government bond purchase programme. His candidacy alarmed at least some other council members.

For those reasons, Mr Weber’s elimination could be seen as showing that the selection process, for all its clumsiness, was working. The danger in the weeks ahead is that other candidates are eliminated for the wrong reasons.

One victim might be Mario Draghi, Italy’s central bank governor, a “hawkish” monetary policymaker with plenty of international banking experience as chairman of the Financial Stability Board, the global forum for regulators and central bankers.

Mr Draghi has run into opposition in Germany not, apparently, because of any character defect or wrong decisions.

He is out of favour because he once worked for Goldman Sachs and because there is a view that voters would not accept an ECB president from a southern European country – the debt crises in the past year have hit countries such as Greece, Portugal and Spain.

The risk then would be of a compromise candidate emerging as frontrunner to take over from Mr Trichet simply because he had not offended anybody.

Whatever his skills, Erkki Liikanen, Finland’s central bank governor would fall into this category.

Berlin may push for another German, arguing that Germany is under-represented at the top of international economic organisations. The candidacy of Klaus Regling, German head of the European Financial Stability Facility – the eurozone’s new rescue fund – could gain momentum.

But at least part of the objections outside Germany to Mr Weber’s candidacy – for instance in Paris – reflected concerns about Germans’ traditionally cautious approach to central banking, focused heavily on inflation fighting. For all his European experience, Mr Regling may be saddled with the same image.

To win the ECB presidency a candidate will need to secure political support across the 17 countries of the eurozone, with the final decision being taken by government leaders.

That implies plenty more horse-trading between national capitals before a winner emerges with majority backing.

Still, that could play to the next ECB president’s long-term advantage. Especially during the past year of the eurozone debt crisis, much of Mr Trichet’s time has been spent building consensus – inside the ECB as well as outside – behind emergency steps to stabilise Europe’s monetary union. A candidate who did not have backing across the region would find that harder.