With Germany’s Sabine Lautenschlaeger starting work on the six-member Executive Board yesterday and designated to help lead bank supervision, the European Central Bank president must now pick someone to steer international relations. Assigning that portfolio and others previously held by Joerg Asmussen forms part of the biggest revamp at the institution’s top tier since Draghi named a new chief economist two years ago.
Draghi might select a member already closely involved in the push for a more stable banking system, such as Luxembourg’s Yves Mersch, or opt for the clout of someone from a large nation, such as France’s Benoit Coeure. Whoever is chosen will attend regular meetings of European finance ministers, such as that held in Brussels today, and negotiate on the next steps toward banking union.
“The person who inherits the portfolio for international and European relations will have to manage the delicate task of acting as the ECB’s midwife on banking union,” said Richard Barwell, an economist at Royal Bank of Scotland Group Plc in London.
The management reshuffle comes at a time when the European Union is racing to finish work on a Single Resolution Mechanism for winding down failing banks before the European Parliament adjourns for elections in May. The proposed SRM would work alongside the ECB, which is currently assessing the health of lenders’ balance sheets and will become the euro-area bank supervisor in November.
When EU finance ministers ended a fractious debate and settled on a blueprint in December, Draghi “strongly” welcomed the plan, even though it diverged broadly from the ECB’s position. The parliament’s stance is closer to a proposal made in July by Michel Barnier, the EU’s financial-services chief.
A compromise on the legislation may be facilitated by politicians’ willingness to fully arm a 55 billion-euro ($75 billion) Single Resolution Fund at a faster pace than previously foreseen. German Finance Minister Wolfgang Schaeuble suggested yesterday that the fund could be filled in less than the 10 years set out in draft proposals. Coeure said last week that the planned transition period is “too long.”
If Draghi wants to have all the board’s responsibilities allocated before the ECB’s Governing Council gathers on Feb. 6 to set monetary policy, he might elect to tell members today or at the next of the weekly meetings, which are held every Tuesday. In addition to the international portfolio, he must reassign tasks including legal services, which was also led by Asmussen before he resigned to join German Chancellor Angela Merkel’s governing coalition.
Luxembourg’s Mersch is currently in charge of the ECB’s role in the banking union project along with Vice President Vitor Constancio, according to the Frankfurt-based central bank’s temporary distribution of responsibilities published on its website. Constancio attended this week’s meetings in Brussels.
While Mersch may be a logical fit for negotiating on how to handle failing banks, Draghi isn’t shy of surprises, as he proved in January 2012 when he selected Belgium’s Peter Praet as chief economist. He made the decision even after German Finance Minister Wolfgang Schaeuble suggested Asmussen would be the “best person.”
“Draghi may well surprise once again but he’s likely to favor the simplest option of asking Mersch,” said RBS’s Barwell. “This would mean only a minor reshuffle rather than a wholesale reorganization.”
If Coeure becomes the international delegate, he would probably give up his strategically important market operations portfolio, said Nick Matthews, senior economist at Nomura International Plc in London. That could spark a wholesale revamp of board responsibilities.
“Draghi might try to avoid another big reshuffle that would presumably result from assigning Coeure the international portfolio,” he said. “I see in particular a natural fit with Mersch. He’s been a very long-standing member of the ECB’s Governing Council and the experience gained from his long and distinguished career makes him an obvious candidate.”
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