A Shock for the ECB

The succession at the European Central Bank was thrown into doubt on July 16 when French magistrate Philippe Courroye ordered Bank of France Governor Jean-Claude Trichet to stand trial for his part in the Crédit Lyonnais scandal that rocked French finance a decade ago.

Trichet, a monetary hawk who is widely respected in the financial markets, was the favorite candidate to succeed Wim Duisenberg as president of the ECB when he steps down next July. But the trial--for "complicity" in presenting inaccurate accounts when Lyonnais was a state-owned bank in the early 1990s--is unlikely to start before next March.

So Trichet, who says he will plead innocent, is unlikely to have cleared his name before Europe's heads of state have to make a final decision on their choice for the ECB's next chief. Courroye's ruling--which came just two months after the French prosecutor had recommended the case against Trichet be dropped--couldn't have come at a worse time for the ECB. With the markets in chaos and the euro zone economy trapped in the mire, the last thing the monetary policymakers in Frankfurt want is a new frenzy of speculation about the succession.

Besides, finding an alternative to Trichet won't be easy. It will almost certainly involve a bout of political horse-trading in Brussels. The French, who insist that Europe's leaders have already agreed that one of their nationals should get the job, will scramble to come up with another candidate who has Trichet's clout and credentials.

By David Fairlamb and Carol Matlack

Edited by Rose Brady

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