Italy’s Mario Draghi dodged last- minute French objections to win the European Central Bank presidency in a dispute that threatened to overshadow efforts to prevent a Greek default.
Draghi’s appointment today at the end of a two-day European Union summit followed a pledge by euro leaders yesterday to do whatever it takes to support Greece as long as Prime Minister George Papandreou pushes through a package of deficit cuts.
National rivalries flared as French President Nicolas Sarkozy held up the confirmation of Draghi, 63, until another Italian on the ECB board, Lorenzo Bini Smaghi, offered to quit to make way for a Frenchman. Leaders rejected questions that they were interfering with the rate setter’s autonomy.
“The ECB’s independence -- of course it’s assured,” German Chancellor Angela Merkel told reporters after the Brussels summit. “What are you referring to?”
The personality conflicts added to tensions between political leaders and the nominally independent ECB, which has prodded euro governments to do more on Greece and tighten the deficit rules that failed to prevent the crisis.
“History shows that once monetary policy is in the hands of short-sighted politicians we end up with higher inflation, so the ECB wants to act independently and take the longer-term view,” said Tobias Blattner, a former ECB economist now at Daiwa International in London.
Bini Smaghi will make his decision in “full independence,” according to an ECB statement issued after the summit.
Today’s horse-trading played out in the same Brussels building where a different cast of French and German leaders bickered into the night over the ECB’s first two presidents on May 3, 1998, the day the EU agreed to launch the euro.
In that compromise, Wim Duisenberg of the Netherlands got the euro’s top monetary post as long as he pledged to step down early to make way for Jean-Claude Trichet, a French central banker now nearing the end of a full eight-year term.
While the EU has since dropped the unanimity rule for key appointments, it rarely overrides demands by leaders of the largest countries.
France’s target in the latest ECB personnel bargaining was Bini Smaghi, who had bucked calls to quit before his term ends in 2013. EU rules that central bankers leave their nationality at the door haven’t prevented the euro area’s biggest countries
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