German Bailout Veteran Asmussen Adds to Merkel’s Government Alumni at ECB
Less than 12 hours after German Chancellor Angela Merkel emerged from an all-night crisis summit on Oct. 27, Joerg Asmussen appeared in front of lawmakers in Berlin to sell the deal he helped broker in Brussels.
“Look at the decisions taken,” her then-deputy finance minister told a parliamentary committee hearing. “You can clearly see the German handwriting.”
A crisis troubleshooter for Merkel since the collapse of Lehman Brothers Holdings Inc. in 2008, Asmussen brings his experience in bailout politics to the European Central Bank. After joining the Frankfurt-based bank’s executive board, the 45-year-old was appointed its head of international and European relations Jan. 3, and will attend his first rate-setting meeting in two days.
Treading the familiar ground of euro-area finance minister meetings and the same summits he attended with the chancellor, Asmussen’s appointment underscores the central bank’s role in cajoling governments to tame the euro-region debt crisis.
“Asmussen certainly sounds more pragmatic” than his “particularly orthodox” German predecessor on the ECB’s executive board, Juergen Stark, said Nick Kounis, head of macro research at ABN Amro in Amsterdam. “That may make it easier to deal with the crisis in that a politically experienced person like Asmussen may be more successful in extracting concessions from the politicians.”
Merkel’s Inner Circle
Asmussen, whose job at the ECB is to make sure that cash- strapped euro governments don’t rely on the bank’s printing press to return to sustainable finances, is the second member of Merkel’s inner circle to move to an executive position at the Frankfurt-based central bank. Jens Weidmann, previously her chief economic adviser, joined the central bank’s council in May after becoming the youngest head of the Bundesbank at age 43.
A Social Democrat, Asmussen joined the German Finance Ministry in 1996. He was made director general for financial market policy in 2003, a role that he filled until 2008 during Merkel’s first term. It gave him a seat as a member and then chairman of the administrative board of the BaFin financial regulator during the banking crisis that led to the creation of a 480 billion-euro ($610 billion) bank-rescue fund and state bailouts for IKB Deutsche Industriebank AG and Commerzbank AG. (CBK)
His responsibilities grew even after Wolfgang Schaeuble, a Christian Democrat like Merkel, took over the ministry. As the banking crisis triggered the deepest recession in living memory, he was promoted to deputy minister, adding responsibility for macroeconomic affairs, fiscal and European policy to his financial-market remit. He has been at Merkel’s side throughout the debt crisis that emerged in Greece in late 2009.
‘Not an Ideologue’
Asmussen benefits from being a “smart backroom guy and not an ideologue,” said Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, who has met Asmussen on several occasions.
Both Asmussen and Weidmann studied under former Bundesbank head Axel Weber, who pulled out of the race for the ECB presidency in February. Stark quit at the end of last year as chief economist, saying his personal credibility was at stake after the ECB resumed sovereign-bond buying last August.
The dual appointments are “a sign that Merkel wants a personal relationship with top people at the ECB,” Erixon said by phone. Her government has undergone a “big shift” from rejecting ECB intervention to backing the ECB’s independence and ability to take its own decisions, in “a very clear signal that the German government has decided not to take any action even if the ECB were to decide to do massive bond purchases.”
Born in 1966 in the northern German city of Flensburg, on the Danish border, Asmussen studied economics at the University of Giessen and the University of Bonn, and got a masters degree in business administration during studies at Bocconi University in Milan in 1991-1992.
He was considered joint favorite for the post of ECB chief economist along with France’s Benoit Coeure, who was also passed over for the job and instead made head of markets, taking charge of the refinancing operations that are central to the ECB’s effort to stem the debt crisis. ECB President Mario Draghi named Belgium’s Peter Praet to the economics job.
“The chancellor always knew that there are no fiefdoms in the ECB and that there can’t always be a particular country that holds a particular post,” German deputy government spokesman Georg Streiter told reporters on Jan. 4. “The post that Asmussen has now taken on is of extraordinary importance and great significance, because it’s a key position.”
Asmussen told Bild newspaper that he’s “satisfied” with his job and will “together with ECB President Draghi” take care of the euro region’s short-term crisis management as well as ensuring the area’s long-term stability. Schaeuble wanted Asmussen to become the third German chief economist at the ECB.
Merkel can “live very well” with Asmussen in his new post, Streiter said. That doesn’t mean he’ll be “the German government’s henchman or its executor on the ECB board,” said Juergen Michels, chief European economist at Citigroup Inc.
“While there’s a lot of common ground between the ECB and the German government, there are also areas in which the two take opposite positions,” Michels said in a phone interview. “It doesn’t hurt that Asmussen has these contacts and capabilities, but that doesn’t mean that he’s just a branch of the German government in his position at the ECB.”
All the same, David Marsh, author of books on Germany, the Bundesbank and the euro, said that by passing over Asmussen for the chief economist job, the ECB is opening a door for Merkel to act during the crisis.
Draghi has “made it easier for the Berlin government to take coming difficult decisions on the euro from a clear-headed economic rather than an overtly political point of view,” Marsh said in an e-mailed note.
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