Nick Kounis, head of financial markets research at ABN AMRO, suggests that according to them Benoit CÅ“uré is the most suitable candidate for the ECB’s president role from the current front-runners, after the ECB President Mario Draghi’s term ends on 31st October 2019.
Key Quotes
“There are a number of reasons why we think Benoit CÅ“uré is the most suitable candidate for the role. First of all, we think that he could achieve consensus on the Governing Council. He is seen by both north and south as a pragmatist and as a centrist in terms of his views. Second, he has been on the Executive Board since 2012 and therefore has been at the very heart of ECB monetary policy over some unprecedented times. This has given him invaluable experience. Indeed, he has been instrumental in shaping the ECB’s views on monetary policy over this period, especially on the effects of QE on markets and the economy, as well as on forward guidance. Third, as the EB member responsible for market operations, he has experience of markets and the ECB’s role in them. With Philip Lane set to be appointed as Chief Economist (to replace Peter Praet whose term ends on 31 May 2019) and Luis de Guindos already appointed as Vice President, there will not be much experience of markets on the EB once Mr Draghi leaves. Mr CÅ“uré’s term on the ECB ends on the last day of next year.”
“Obstacles to the appointment
There are two key obstacles to Mr CÅ“uré’s appointment. First of all, he is already on the EB and his term is expiring, and under EU law the eight-year terms of EB members are not renewable. However, some legal experts suggest that this fixed term restriction relates to the same role on the EB (with a distinction made between the jobs of President, Vice President and other roles) meaning it would be possible to switch role and serve another term. According to the WSJ, the ECB has received the same legal opinion. The second possible obstacle is Mr CÅ“uré’s nationality. The previous ECB President was a Frenchman and some member states may object to two of the first four ECB Presidents being French. However, the ‘nationality’ issue should be seen in the context of appointments to a broad-range of European jobs. In particular, the German government seems to have its eyes on having a German as the President of the European Commission, which may mean it may give its backing to a French candidate for ECB President.”
“Implications for monetary policy
If Benoit CÅ“uré were to become ECB President – with Philip Lane being appointed Chief Economist – the leadership would be perhaps somewhat less dovish than the current Draghi-Praet double act. However, we still judge there would be a great deal of continuity in terms of the ECB’s reaction function. In particular, we would not expect a CÅ“uré-Lane ECB to hike in 2019 or to end reinvestments before the end of 2021 given the macro environment we expect.”
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