Estonia will probably pick Finance Minister Juergen Ligi, who managed record austerity measures, or Ardo Hansson, the World Bank’s chief economist for China, as its next member of the European Central Bank governing council.
The two are the frontrunners as the central bank’s supervisory board meets today at 3 p.m. in the capital, Tallinn, to narrow the field. Other candidates include Andres Sutt, an adviser at the International Monetary Fund, and Andres Tupits, a lawyer who worked at the ECB for seven years.
Europe’s governments are struggling to contain a debt crisis that has shaken the euro, which Estonia adopted this year. Hansson, a Harvard-educated economist, supports members of the single currency being “pro-active” on fiscal policy. With Ligi, the risk is that his career as a politician may affect his decisions, according to economists.
“With Ligi at the helm, there is a risk that central bank decisions will become part of day-to-day party-political football,” said Fredrik Erixon, head of the European Centre for International Political Economy in Brussels. “Ligi must be prepared to take decisions that go against the wishes of his current boss and colleagues. That’s a tall order for anyone.”
Ligi and Hansson are the favorites, said analysts including Raul Eamets, a professor of economics at Tartu University.
The successor to central bank Governor Andres Lipstok, who steps down in mid-2012, will be confirmed by Estonian President Toomas Ilves after a background check. A candidate failing to gather at least five votes in the eight-member panel today would force another board meeting within a month.
Ligi, 52, was named Europe’s finance minister of the year in January by The Banker magazine after he implemented austerity measures equal to 9 percent of economic output in 2009 to remain on course to adopt the euro. He has served as a lawmaker and defense minister since 1995 and has degrees equivalent to master’s in geography and international economics.
“The main task of the central bank at any time is to guarantee price stability,” he said of the ECB in an e-mailed response to questions from Bloomberg. “Inflation should remain under control in the coming years so as not to harm Europe’s competitiveness and maintain trust in the euro.”
Hansson, 53, is a U.S.-born son of Estonian immigrants with a PhD in Economics from Harvard University. After Estonia regained independence in 1991, he worked as an adviser to several prime ministers and, together with Jeffrey Sachs of Columbia University, was among the architects of the Estonian kroon, replaced by the euro in January.
An advocate of a frugal lifestyle, Hansson became known to the public as the “evil oracle’” for predicting Estonia’s first post-independence recession and the bursting of a stock-market bubble in 1997.
Euro region members can avoid the possible spread of the debt crisis by being more “pro-active” on fiscal policy and encouraging bank consolidation, Hansson said in a phone interview from Beijing last week, echoing comments from Ligi. He sees himself and Ligi as similar candidates.
“I don’t think there is going to be too much difference in the kind of basic instincts or policy principles,” Hansson said. The board “will just be faced with the tradeoffs of the experiences and the skills.”
Lipstok, whose seven-year term ends June 6, 2012, became a voting member of the ECB council when Estonia adopted the euro on Jan. 1. He can’t be re-elected. As of Sept. 2, no candidate had sufficient support to win outright, supervisory board Chairman Jaan Mannik said by phone from Sweden that day.
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