European Central Bank President Jean-Claude Trichet said being ready to act in exceptional circumstances and having a long-term view are key job qualifications for the candidate to replace him in November.
“All presidents of central banks, governors of central banks, need, at the same time, a long-term sense — because we’re asked to insure price stability in the long term,” Trichet told Europe 1 radio yesterday when asked to describe the qualities needed for his successor. They also “need a sense of direction and the capacity to react in exceptional circumstances,” he said.
Bargaining among the euro region’s 17 leaders rather than qualifications alone will determine who replaces the Frenchman when his non-renewable eight-year term concludes at the end of October. The race for a successor was thrown open this month when Bundesbank President Axel Weber, the front-runner, announced his resignation on Feb. 11 after seven years as Germany’s top central banker.
Bank of Italy Governor Mario Draghi, a former Goldman Sachs Group Inc. vice chairman, is the favorite to replace Trichet, according to Paddy Power Plc. Other potential choices on the current ECB Governing Council include Finland’s Erkki Liikanen, Luxembourg’s Yves Mersch, and Nout Wellink of the Netherlands, the bookmaker says.
While Finland hasn’t put Liikanen forward as a candidate, “the situation could change,” Finnish Finance Minister Jyrki Katainen told Helsinki-based broadcaster YLE1 on Feb. 19. “I’ve discussed this with Liikanen and we’ve agreed to monitor the situation and not get ahead of ourselves.”
Katainen said that’s “it’s great that Finland has people who are so highly regarded” as Liikanen. “He has such broad experience spanning politics, diplomacy, the European Commission and central banking.”
According to the 1991 Maastricht Treaty, the ECB president must be from the euro area and boast “recognized standing and professional experience in monetary or banking matters.”
Weber told Bloomberg News in August that “it’s not so important” for a central banker to be a diplomat. His advocacy of central bank independence and aversion to inflation led him to object to last year’s ECB bond-buying program aimed at staunching the debt turmoil.
Paddy Power on Feb. 16 offered odds of 4 to 9 on Draghi getting the job. That means a gambler betting 9 euros ($12) would win 4 euros and their stake back if Draghi were picked. Liikanen was second favorite on 2 to 1, and the bookmaker offered odds of 8 to 1 on Mersch and Wellink. Klaus Regling, head of Europe’s bailout fund, was a 20 to 1 outsider.
Trichet has steered the 17 year-old central bank through the financial crisis and then Europe’s sovereign debt crisis. When the turmoil erupted in August 2007, he won praise from economists and academics for averting a greater meltdown by issuing emergency loans to banks. The acclaim turned to impatience as Trichet refused to immediately follow other central bankers in cutting interest rates.
“I’m proud the governing council was the first to take very difficult decisions” that “never put into question the long-term direction,” which is that of price stability, he said in the interview yesterday.
Trichet vowed again that the Frankfurt-based central bank will maintain inflation in line with its 2 percent ceiling over the next decade.
“There’s permanently an inflation risk,” he said. “What counts is to take the necessary measures so they don’t induce” an increase in “second-round effects” in terms of increasing wage demands, he said.
Asked if his tenure as president could be extended, he cited the treaty: “I have an eight-year non-renewable term.”