Euro market in chaos as Weber's ECB presidential ambitions fade
Published 10/02/2011 | 05:00
BUNDESBANK chief Axel Weber's ambitions to become the next head of the European Central Bank appear to have been dealt a fatal and unexpected blow by his opposition to measures aimed in part at helping Ireland's insolvent banks.
Reuters yesterday quoted senior European sources as saying that Mr Weber will not try to succeed Jean-Claude Trichet as ECB president when his term expires in October.
Weber, a hardline inflation-fighter who heads Germany's central bank, had been seen as the leading contender to replace Trichet. His withdrawal from the race surprised markets and sent the euro down against the dollar.
The abrasive Bundesbank boss appears to have fallen victim to opposition from several countries following his trenchant criticism of the ECB last May, when the ECB's bond buyback programme was introduced to help banks made insolvent by the financial crisis. Critics complained that this hardline monetarist stance failed to take into account political realities in Europe.
Weber said the programme carried significant risks to stability policy -- an obsession in Germany, where the national psyche is scarred by the experience of hyper-inflation in the 1920s, when a wheelbarrow full of money was needed to buy a loaf of bread.
The comments earned him a public rebuke from Trichet just as the debate was starting about who should be the next ECB president.
"I think it's been clear for some time that Weber was too abrasive a character for the role of ECB president," said James Nixon, an economist at Societe Generale. "If Weber had been president he would have been a very hawkish president, but now I expect we will have a character that is more of a committee player."
Mr Nixon tipped Klaus Regling, the German official who wrote a detailed report on Ireland's financial crisis for the Government last year, as the next president of the ECB.
Other analysts named Italy's hawkish Mario Draghi for the position, Erkki Liikanen of Finland, Luxembourg's Yves Mersch and Nout Wellink of the Netherlands.
The confusion upset many observers who saw the new question marks over Trichet's succession, which must be decided by October, as another sign that Europe is unable to get her house in order.
"This is pure chaos," said Carsten Brzeski, senior economist at ING Group in Brussels. "Europe has already made a mess of the sovereign debt crisis. Are we going to make a mess of the succession of Jean-Claude Trichet? This mess needs to be cleared up very quickly."