World Crisis Online

Chancellor Angela Merkel on Wednesday picked Jens Weidmann, her chief economic adviser, to succeed Axel Weber, as president of the Bundesbank.

Mr Weidmann won coalition approval to become the youngest president of Germany’s central bank in its 53-year history.

The move follows the surprise resignation of Axel Weber as head of the fiercely independent German central bank.

Mr Weber, who will leave at the end of April, had been expected to be Germany’s candidate to be the next president of the European Central Bank. His departure has left Ms Merkel without an obvious alternative for the ECB job.

Sabine Lautenschlaeger, the executive director for banking supervision at the BaFin financial regulator, was on Wednesday nominated as vice president, becoming the Bundesbank’s first female board member.

Mr Weidmann’s move to the Bundesbank was seen by some analysts as indicating that Ms Merkel may decide not to press for a German to run the ECB, although government sources in Berlin cautioned that no such decision had yet been taken.

The ECB’s six-man executive board already includes a German – Jürgen Stark, whom Ms Merkel could have moved to the Bundesbank instead of Mr Weidmann if she had wanted to make space for a German in the top job.

“I think it is some kind of indication. They are certainly not clearing the way for a German,” said Erik Nielsen, European economist at Goldman Sachs.

Mr Weber’s decision not to put himself forward as successor to Jean-Claude Trichet as president of the ECB – who steps down at the end of October – has alarmed Germany’s strict monetary disciplinarians.

However, news of Mr Weidmann’s likely move coincided on Tuesday with an interview with Mario Draghi, Italian central bank governor and now favourite to become ECB president, in the Frankfurter Allgemeine Zeitung, a leading conservative broadsheet, which was instantly interpreted as the opening shot in a campaign to woo the German political and financial establishments.

Mr Draghi stressed his absolute commitment to currency stability and control of inflation – qualities seen in Germany as essential for any central bank governor.

As a close personal adviser to the German chancellor, Mr Weidmann, 42, could prove a controversial choice to head the Bundesbank, a much respected national institution that is supposed to keep entirely clear of political influence. However, he is a former head of the monetary policy division of the Bundesbank and a former pupil of Mr Weber, and is seen as a highly competent economist and a discreet and dedicated public servant. All three parties in Ms Merkel’s coalition have indicated support for his appointment, although the move has been criticised in the opposition Social Democratic party.

Under a convention built up over the ECB’s near 13-year life, its six-man executive board includes one – but only one – representative from each of the eurozone’s main economies: Germany, France, Spain and Italy. The board also has to balance northern European and southern European member states. Executive board members are also members of the 23-strong decision-making ECB governing council, which also includes the national central bank governors of the 17 eurozone countries.

Mr Draghi faces the problem that the ECB’s vice-president is from Portugal, another southern European country, although that is probably surmountable if northern Europeans held other seats. If Mr Draghi did become ECB president, however, his compatriot Lorenzo Bini Smaghi would almost certainly have to be offered an alternative post – perhaps as head of Banca d’Italia.

Last week, Wolfgang Schäuble, finance minister, said Germany had never said it would insist on a German for the top ECB job. Thorsten Polleit, economist at Barclays Capital in Frankfurt, said: “His words implied they could warm to the idea of a non-German, including Mr Draghi.”