EU chooses Spain’s de Guindos for ECB vice-chair, paving way for German head

BRUSSELS — Eurozone finance ministers on Monday chose Spanish Economy Minister Luis de Guindos to succeed European Central Bank (ECB) Vice President Vitor Constancio in May, a move likely to boost the chances of a German becoming head of the ECB next year.

The choice of a Southern European for vice president increases the likelihood that a northerner such as German Bundesbank Governor Jens Weidmann could be elected to replace Mario Draghi as head of the ECB in 2019. This could influence the bank's ultra-loose monetary policy.

"The Eurogroup [of eurozone finance ministers] today gave its support to the candidacy of Luis de Guindos for the position of vice president of the European Central Bank [ECB]," an EU statement said after a brief discussion among finance ministers.

De Guindos said he would resign as economy minister within days after being chosen as ECB vice president.

Initially faced with two candidates — de Guindos and Irish central bank governor Philip Lane — the ministers had their choice made simple for them by Ireland's decision to withdraw Lane's name.

"I believe that it is crucial that the election of a new vice president for the ECB is based on consensus, and should not be a source for any disagreement," Irish Finance Minister Paschal Donohoe said in a statement.

"In that context, I have decided that, on balance, it would be in the interests of the Euro-area as a whole to withdraw Philip's candidacy in advance of any vote," he said, adding that de Guindos had an "excellent track record".

Ministers said the appointment of De Guindos should be finalised by EU leaders in a regular summit on March 22-23. 

The European Parliament's economic committee, which has only a consultative role, said after an informal hearing of both candidates last week that Lane was a better choice, but eurozone officials said de Guindos was the favourite.

Spain, the eurozone's fourth-largest economy, has not had a representative on the executive board of the ECB since Jose Manuel Gonzalez-Paramo's term ended in 2012. 

Ireland has never held a post in the ECB at all, but Lane is widely seen as a top candidate to become ECB chief economist when Peter Praet leaves his position next year, eurozone officials said.

Weidmann

The choice of a Southern European for vice president could pave the way for Weidmann to be elected at the head of the ECB next year.

"It looks like that is the case," one eurozone official said. "But it is a chess game and we don't know all the players yet. Lane would be well placed as chief economist, but Weidmann depends on the distribution of the big jobs in 2019." 

The "big jobs" include the head of the European Commission, the chairman of European Union leaders and the head of the European Parliament —all of which will come up for replacement in 2019.

Eurozone officials said Weidmann could get the ECB top job if, for instance, France got the presidency of the European Commission, naming someone like the EU's chief Brexit negotiator, Michel Barnier, or IMF head Christine Lagarde.

Picking the Bundesbank chief for the ECB presidency may be tricky. Although Weidmann is considered a top-notch central banker, he has alienated some officials with his opposition to the ECB's ultra-easy monetary policy, which is credited with reviving economic growth.

Some other central bank governors regarded this as disloyalty in a time of crisis.

Weidmann has also ruffled some political feathers, clashing publicly with Italy's then-prime minister, Matteo Renzi, over Rome's failure to cut its debt further.

After being on the losing side in the ECB's big decisions on economic stimulus, Weidmann might also find it hard to unite the Governing Council, which strives for consensus decisions and rarely resorts to voting.