The European Central Bank is getting a new deputy — but don’t expect a sudden hawkish change of direction

Spain's Minister of Economy Luis de Guindos
Saul Loeb | AFP | Getty Images
Spain's Minister of Economy Luis de Guindos

The European Central Bank is getting a new deputy — but don't expect a sudden hawkish change of direction

As Europe's leaders prepared to choose a new vice president for the continent's Frankfurt-based central bank, the campaign for the appointment proved brief and anything but hard-fought.

The successful candidate was Luis de Guindos, Spain's current minister for the economy, and given the role's significance for determining monetary policy across the euro zone in the coming years, he should expect some intense scrutiny.

Finance ministers from the 19 countries that use the euro met yesterday to decide between two candidates: de Guindos and the governor of Ireland's central bank, Philip Lane.

Last week, both men had testified privately before members of the European Parliament, and based on the public comments that followed those appearances, the assembled lawmakers sounded far more enamoured with the Irishman. But those parliamentarians enjoyed a merely consultative role in the selection process, and the winds of national interest seemed to favor the Spaniard.

De Guindos is a politician's politician, at turns charming and outspoken, a dispenser of bon mots at the international gatherings and conferences that fill up a finance minister's diary. But he does not shy away from voicing carefully calibrated criticisms, with Catalonia's pro-independence movement leadership and its impact on the wider Spanish economy a frequent target for his ostensible ire in recent months.

The nakedly partisan nature of his discourse and behavior puts him slightly at odds with the European Central Bank's (ECB) nominally apolitical nature, and this raised concerns among some of Europe's political parties and the wider Brussels commentariat. De Guindos' career in the private sector ended with him holding the can as the head of Lehman Brothers' operations in Spain and Portugal when the parent bank kicked the bucket in 2008. His ambition for a high-profile European post has been on public display once before, when he ran unsuccessfully for president of the Eurogroup, losing out to Dutchman Jeroen Dijsselbloem.

Meanwhile, Lane was a relative newcomer to the international scene with a much lower profile, having only taken over the governorship of Ireland's Banc Ceannais in late 2015. His academic and advisory experience in global macroeconomics was extensive, with a doctorate at Harvard, teaching posts at New York's Columbia University then Trinity College, Dublin (which kindly granted him leave to take up the role of governor), and years of consultative work — with the Asian Development Bank, OECD, the International Monetary Fund and World Bank, among others.

And while the Irish government had been publicly extolling his suitability for the past few weeks, the campaign appeared either to be waged too halfheartedly, or else began too late, to dislodge the frontrunner. Madrid officials insisted that Berlin had promised them the ECB vice presidency in a previous round of horse trading, and Dublin apparently forswore its ambition for a seat at the central policy table, and surrendered to the desire for a continent-wide consensus.

And so just hours before an informal Eurogroup vote on Monday night, Irish Finance Minister Paschal Donohoe announced he would withdraw Lane's candidacy for the position.

While De Guindos' views on monetary policy and easing, in particular, are perhaps less documented than those of a widely-published academic economist like Lane, he said in a recent interview that he thinks the central bank's bond-buying policy and low interest rate environment have undoubtedly helped to drive Europe's growth. He added that inflation will rise close to 2 percent in the near future, and insisted positive economic indicators should encourage Europe's integration, a process he believes the ECB leadership is responsible for defending.

ECB watchers should not expect the Spaniard to diverge too strongly from the approach promoted by his likely future boss — the Italian described by a recent guest on our TV channel as "do everything possible (Mario) Draghi." But judging by his record in bailout-rescued Spain, it is likely his political experience will color his approach to the new job, and as of now his selection seems all but guaranteed.

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