Since the financial crisis, central banks have put in place a host of new rules to govern appointments at institutions they oversee. It’s more than a little ironic, then, that senior appointments to the executive of the European Central Bank are decided by euro-zone finance ministers much along the lines of merchants haggling at a bazaar. Appointees have to be qualified, of course, but the range of ECB jobs to come up over the next couple of years will, inevitably, be filled by candidates from different regions of the euro zone. You could be the best candidates, but if it’s Buggins’s turn, then tough luck.
There is no doubt that Philip Lane, the governor of the Central Bank of Ireland, will be a strong candidate for the vice-presidency of the ECB, the first of the posts to become vacant. He is to be nominated by Paschal Donohoe, the Minister for Finance confirmed yesterday. Lane’s academic credentials are impeccable – he is on leave from his post as professor of political economy at Trinity College Dublin – he has chaired high-level ECB committees, and as a member of the ECB’s 30-strong governing council he knows the territory.
But he will still start the race, at best, as second favourite. The decision to nominate him suggests Donohoe believes he has a decent chance nonetheless. And he may also have in mind a longer game, as, if Lane is not chosen this time, further ECB board positions are coming up next year.
Ireland will seek support from the 'purist' lobby, perhaps including Germany – countries that would prefer a qualified economist for this senior ECB job
The favourite – and only other declared candidate – is the Spanish economy minister, Luis de Guindos. Spain’s tactic has been to lay claim to the job early, partly on the basis that it has had nobody on the six-member executive board since 2012. The Spaniard will not be easily overtaken. But this will come down to political haggling. There is some resistance at the ECB and in some member states to appointing a politician. Ireland will seek to attract the “purist” lobby, perhaps including Germany – in other words, countries that would prefer a qualified economist for this senior job.
The odds appeared to be against an Irish candidate until a couple of weeks ago, with speculation that we would wait for 2019-20, when three further vacancies on the executive board – and the ECB presidency itself – will be up for grabs. But clearly the Irish side senses an opportunity to at least have a decent run this time. Although Spain can play the card that it has had no executive-board member since 2012, Ireland can counter this as the only founding euro-zone member never to have held such a position. It is unclear whether there will be other candidates in the field.
Irish officials also know how to play the lobbying game around finance departments across the EU, having surprised everyone by nearly winning the European Banking Authority for Dublin, losing to Paris only on the drawing of lots, after a tied vote. As with the EBA, the ECB positions are decided by a vote of euro-group finance ministers, on February 19th. There follows a nonbinding hearing before the European Parliament and ratification by euro-zone leaders.
In replacing Lane the Government would again have to decide whether to prioritise economic expertise or administrative and management experience
Lane’s pedigree makes him a strong runner, although how the politics of this will play is anyone’s guess. There may be an Irish feeling that there is little to lose. If Lane does not win he will at least be on the pitch for the other positions: he has been mentioned in particular as a candidate to be the ECB’s chief economist, due to be filled in May 2019. Lane’s deputy Sharon Donnery would also be seen as a credible runner for one of the senior jobs.
If Lane does move on, then Donnery would be one of the likely candidates to step into his shoes as governor of the Irish central bank. But, assuming a wide process, as occurred last time, others could challenge, too. Robert Watt, secretary general at the Department of Public Expenditure and Reform, narrowly lost out to Lane last time and would be another potentially strong contender if he decided to apply again. Other candidates could also emerge.
In making the appointment the Government would again be faced with deciding where its priorities lay between economic expertise and administrative and management experience. The former is useful for batting in Frankfurt, the latter for managing controversies such as the tracker-mortgage scandal. A vital factor would be maintaining the independence of the institution, where for years outgoing senior officials at the Department of Finance shuffled off to the top job at the central bank. If Donohoe does get his man on to the executive board in Frankfurt, then he will create another headache for himself in picking his successor.
