At last the European Central Bank has started work on a new headquarters building in Frankfurt. It will be huge (a conversion of an old covered market), expensive (the bankers will struggle to keep construction costs under €500 million — £440 million) and architecturally ambitious, with two leaning towers. Critics say that it represents a kind of hubris, a celebration of the swollen power of the eurozone at a time when it is facing its biggest crisis — banks across the world, infected by the "New Modesty", are scaling back their building plans. The ECB, by contrast, is putting up a secular temple.
The question that nags EU leaders at the moment is who will be the temple’s High Priest? The incumbent, Jean-Claude Trichet, is due to step down next year. The decision on his replacement is a political one and should be taken by this June. So the lobbying is hard, and, as usual in Europe, involves Byzantine calculation about quotas: north Europe versus south, big countries versus small and — it was ever thus — unstated German interests against unstated but blindingly obvious French interests.
The two front-runners are the head of the German Bundesbank, Axel Weber — known to his colleagues as “Turbo-Axel” because of his ability to accelerate through and past the opposition — and the head of the Italian central bank, Mario Draghi. This is not a run-off between a hard-nosed hard-euro northerner and a soft southerner: Mr Draghi is widely admired within the eurobank bureaucracy. A Banca d’Italia employee was quoted recently as saying: “The only thing holding back Mario is the fact that he doesn’t have a German passport.”
And there is the rub. The Germans want a German at the helm of the euro. From the currency’s inception they have wanted to leave their mark (no pun intended) on it. The political price for European, and, above all, French acceptance of German unification was European Monetary Union. The abandoning of the Deutschemark and of its domination of mainland Europe was painful for most ordinary Germans.
So an elaborate process of horse-trading has accompanied the management of the euro from the beginning. It was the Germans who drove the EU Stability and Growth Pact — the insistence on limiting budget deficits to 3 per cent of GDP. It was the Germans who wanted the euro’s headquarters to be in Frankfurt. In return non-Germans — Wim Duisenberg, a Dutchman, and Mr Trichet — were allowed to take the helm of the ECB. And Germans were reassured to learn that even non-Germans could hold the line and fight for the bank’s independence, just as the Bundesbank used to challenge West German governments in the past.
Now the world is changing fast and the Germans want their man in the new eurotemple in Frankfurt. Mr Weber, reckon Angela Merkel’s advisers, is capable of holding firm against real inflationary pressures, will be tough on Greece if it starts to backslide and will resist against efforts to erode the independence of the ECB. The last quality is particularly important. The French are pushing harder for a “European economic government” and Eduard Balladur, the former Prime Minister, has proposed that each of the 16 eurozone members submit their annual budgets for majority approval. The idea is to keep track of the likes of Greece, Spain, Portugal and Ireland — the “PIGS” — but it has sent alarm bells ringing in Germany. The new ECB chief is going to have to address big issues: how to ensure that its tight price stability targets do not lead to deflation in the eurozone periphery; how to steer the eurozone when growth becomes stronger. None of these issues will be made any easier by French attempts to use the Greek crisis to place the euro management under increasing political control.
So Germany has been manoeuvring for weeks to get Mr Weber in place. First, it did not put forward a candidate for the EU presidency or the foreign affairs job, knowing that this would have ruled out a bid for the ECB. Secondly, it enthusiastically backed a Portuguese economist, Vitor Constancio, for the vice-presidency of the ECB. The logic: one Club Med representative at the top is quite enough. But the backing for Mr Constancio has upset the Luxembourgers (who had their own candidate for the vice-presidency) and others who feel that Germany is barging its way into the ECB job.
The idea that the ECB presidency might be settled on individual merit drew howls of cynical laughter at a recent high-profile dinner party in Berlin. But a head-to-head comparison, Weber v. Draghi, shows them to be very different characters. Mr Weber thinks like a politician and times his initiatives accordingly. He has trimmed and modernised the Bundesbank and was at the hub of the country’s crisis management during the financial meltdown. Colleagues say that he has the charm of a bulldozer.
Mr Draghi is a better communicator, and, as chairman of the Financial Stability Board, has a higher international profile. He was also an investment banker at Goldman Sachs — and leaks to the German press are suggesting that this could be held against him, shedding doubt on his independence.
Rarely in recent years have the Germans fought so hard for a top-level job. The campaign, however, does not reflect a new German self-confidence, but rather Berlin’s deep nervousness about the future of the eurozone.
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