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Europe Delays ECB Nomination as France Resists Backing Mersch

Europe Delays ECB Nomination as France Resists Backing Mersch
“We need time,” French Finance Minister Francois Baroin told reporters yesterday at a meeting of the finance ministers in Copenhagen. Photographer: Torkil Adsersen/AFP/Getty Images

Euro-area finance ministers put off a decision on filling an upcoming vacancy on the European Central Bank’s Executive Board as France resisted endorsing the front-running candidate, Luxembourg’s Yves Mersch.

“We need time,” French Finance Minister Francois Baroin told reporters yesterday at a meeting of the finance ministers in Copenhagen. “We need a global accord” that includes decisions on posts such as chairman of euro finance meetings and the head of the European Stability Mechanism, he said.

Mersch, Europe’s longest-serving central banker since the euro was introduced, is running against rival candidates from Spain and Slovenia. French President Nicolas Sarkozy said Jan. 20 that his country wants Spain, the region’s fourth-largest economy, to stay represented on the ECB board.

A decision on the post will be delayed until mid-April, Luxembourg Prime Minister Jean-Claude Juncker told reporters yesterday. He called Mersch the “best candidate ever proposed” and said “the French government can’t yet signal approval, even though approval is in the air.”

Juncker said he will give up the role of chairing euro finance meetings to make it easier to secure the ECB post for a fellow Luxembourger under Europe's tradition of sharing out top economic jobs. While he will stay as Luxembourg's prime minister, his retreat from the euro role ``has paved the way for Mr. Mersch,'' Juncker said.

Spain said it won’t pull its nominee, Antonio Sainz de Vicuna, head of legal services at the ECB. The third candidate is Mitja Gaspari, the former head of Slovenia’s central bank.

Inflation Hawk

The candidates are vying for the post being vacated by Spain’s Jose Manuel Gonzalez-Paramo at the end of May.

Mersch, 62, is the only central banker still in office since the euro was introduced in 1999. As Luxembourg’s representative on the ECB’s wider policy-setting council, he earned a reputation as an inflation hawk.

With the ECB now run by Mario Draghi of Italy and Vice President Vitor Constancio of Portugal, northern countries back Luxembourg’s candidate as a way of arresting a perceived shift of power toward southern Europe.

Luxembourg, the European Union’s richest country in per capita terms, is one of four euro-region nations to emerge from two years of fighting the debt crisis with its top AAA credit rating intact.

“For the balance of the board, it’s important to see if the four AAA rated countries are sufficiently represented,” Finance Minister Jan Kees de Jager of the Netherlands, also top-rated, said on March 7.

AAA Rating

Mersch’s arrival would leave two AAA countries, Luxembourg and Germany, with board representation. The remaining seats are held by Italy, Portugal, France and Belgium. The six board members are joined once a month in Frankfurt by the 17 heads of national central banks for the monetary assessment.

Finance ministers can settle the nomination via teleconference, Juncker said. The nominee would face a European Parliament hearing and non-binding vote before starting an eight-year term on June 1. The parliament has no power to block ECB appointments and has never issued a negative recommendation.

Mersch's appointment would be part of an EU personnel package. Germany is angling to win the job of chairing euro meetings for its finance minister, Wolfgang Schaeuble, with opposition coming from southern countries upset with his handling of bailout politics. A German in that role would likely bar Germany’s Klaus Regling, manager of the temporary rescue fund, from running the permanent fund to be set up in July.

France has set its sights on the European Bank for Reconstruction and Development presidency when the term of its current president, Thomas Mirow of Germany, ends later this year.

“It’s a bit of a merry-go-round,” Baroin said.

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