World Crisis Online

By Simon Kennedy and Jana Randow – Play Video Feb. 11 (Bloomberg) — Bundesbank President Axel Weber resigned, ending three days of confusion and opening the field for candidates from Finland to Italy to become the next chief of the European Central Bank. Bloomberg’s Scarlet Fu reports. (Source: Bloomberg)

Axel Weber is exiting the Bundesbank on the same unconventional path he’s treaded throughout seven years as a central banker.

The 53-year-old native of Kusel, Germany, who once argued “it’s not so important” to be a diplomat, today met German Chancellor Angela Merkel in Berlin and “expressed the wish to resign,” said Steffen Seibert, a government spokesman. He will leave his post on April 30 and a successor will be announced in the next week.

Having begun the week the perceived favorite to succeed Jean-Claude Trichet as president of the European Central Bank, Weber today ended three days of confusion triggered by comments by an unidentified associate that he would quit the Bundesbank.

“It’s a staggering fall from grace for one of Europe’s top central bankers,” said James Nixon, co-chief European economist at Societe Generale SA and a former ECB forecaster.

The events, which left French Finance Minister Christine Lagarde “dumbfounded,” echoed Weber’s unorthodox and outspoken past. Where Trichet is a consensus-builder, Weber’s public objections to buying bonds and cutting interest rates suggested he placed the primacy of his own views on beating inflation and maintaining central bank independence above the need to appease politicians or fall in line with colleagues.

The decision of the onetime marathon runner ends a policy- making career that began in 2004 when he was the surprise choice to replace Ernst Welteke atop the central bank of Europe’s largest economy following two decades in academia and a time spent advising the German government on economics.

Constance Graduate

A graduate of the University of Constance, where he sported shoulder-length hair and supplemented his income in holidays as a roofer, he ruffled feathers early on in his tenure by seizing control of the Bundesbank’s economics division.

It was a sign of things to come. He most recently isolated himself on the ECB’s now 23-member Governing Council with calls for the bank to stop the bond purchases that are a key plank in Europe’s battle against its debt crisis. Having opposed the May decision within hours of it being taken, he said Oct. 13 there was “no evidence” the purchases were reducing bond yields. Trichet dismissed Weber’s view five days later, saying they didn’t reflect the consensus of the council.

It wasn’t the first time Weber swam against the current. Even as the economy slumped in 2009 he tried to stop the central bank from buying covered bonds to ease credit and was unheeded after he warned against allowing the euro-area’s benchmark interest rate to fall below 2 percent. It was cut to a record low of 1 percent that May and held there since.

ECB Protocol

Weber also broke the protocol that the ECB president makes major announcements first. In November 2009 he landed on Trichet’s so-called black list by publicly revealing that the ECB would tighten its lending to banks.

To Julian Callow, chief European economist at Barclays Capital in London, such actions were at odds with the need for an ECB president to unite fellow central bankers and to secure the support of leaders who will pick Trichet’s successor.

“Weber’s past behavior has not been consistent with someone who wants to keep his nose clean and be the candidate,” said Callow, a former Bank of England official.

Friedrich Thelen, founder of Thelen-Consult, a Berlin-based business advisory group, said Weber may have wanted Europe’s top monetary policy role only to fall victim to euro-area politics, with French President Nicolas Sarkozy likely wanting Germany to commit to looser economic policies before he backed its candidate.

‘Throwing in the Towel’

“This wasn’t on the cards for Merkel,” Thelen said. Now, Weber is “throwing in the towel in anger over the promises Merkel had made to him.”

Merkel now has to decide whether to endorse another countryman or seek a kindred spirit elsewhere. Her challenge is to find someone whose appointment would restore faith in the euro and monetary union within a German electorate irritated by the bailouts of wayward partners. Greater financial support for indebted euro-area countries was opposed by 64 percent of German respondents in a Jan. 28 FG Wahlen poll.

Weber, who is married and has two children of high school and university age, has been linked with a position at Deutsche Bank AG with analysts saying he may make a better chairman than chief executive officer. Newspapers including De Welt have suggested he may succeed Josef Ackermann as CEO of Germany’s largest bank.

Bundesbank Prudence

While he lacked Trichet’s lobbying skills and deft touch with governments, Weber’s advocacy of low inflation, fiscal prudence and central bank independence were in keeping with his status as Bundesbank chief. Created in 1957, the institution had the prime responsibility of safeguarding the deutsche mark as the bedrock of Germany’s post-World War II recovery and preventing the runaway inflation that gripped the nation in the early 1920s.

Weber defended himself against critics on Oct. 25 by saying that he always followed “his own path and that has always served me well.” In an August interview with Bloomberg News he said “it’s important to be a diplomat for the diplomatic corps, it’s not so important for a central bank.”

“He has spoken out about things that are of concern to him,” said Stefan Gerlach, a professor for monetary economics at Frankfurt’s Goethe University. “He’s always been transparent. He’s just honest.”

Just this week Weber talked about the workload of being a top central banker. On Feb. 7 he told an audience in Tallinn, Estonia that the financial crisis meant “working days become longer and weekends are no longer weekends.” He said “I never dreamed I would be a policy maker myself.”

To contact the reporters on this story: Simon Kennedy in London at skennedy4@bloomberg.net; Jana Randow in Frankfurt at jrandow@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net