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EU: Euro-Zone Ponders Duisenberg Successor At European Central Bank

  • Mark Baker

The head of the European Central Bank (ECB), Wim Duisenberg, yesterday put to rest speculation about his retirement, saying he will step down in 2003. Duisenberg, the ECB's first and only president to date, oversaw the successful introduction of the euro on 1 January. The announcement sets the stage for a successor, but the leading candidate -- French central bank Governor Jean-Claude Trichet -- has been implicated in a domestic banking scandal. Currency traders say any open dispute about Duisenberg's successor will ultimately hurt the euro.

Prague, 8 February 2002 (RFE/RL) -- The announcement yesterday by ECB President Wim Duisenberg that he will step down next year has put the focus squarely on who will succeed him.

Duisenberg, the Frankfurt-based ECB's first and only president, told reporters yesterday he will leave the bank in July 2003 -- three years before his eight-year term expires.

"I intend to resign on the ninth of July 2003, for purely personal reasons. I hope to be 68 on that day, and I am inclined to say enough is enough," Duisenberg said.

Duisenberg, a Dutchman, was appointed to head the 12-nation euro-zone's central bank in June 1998. He said he never considered it likely he would serve out his full term.

"When I was appointed, I did not regard it as likely -- and I made that public -- that I would serve my full eight-year term," Duisenberg said. "And I regard 68 as a respectable age to retire after having helped and having been instrumental building up a new institution like the European Central Bank."

Duisenberg said he is willing to stay on longer if a successor cannot be agreed to by the member states.

Currency markets scarcely reacted to the news, with the euro trading around 86 U.S. cents.

Adolf Rosenstock, an ECB watcher at Nomura Securities in Frankfurt, said traders were expecting the announcement and that there were no unpleasant surprises.

"All of this fits in very well with what was expected. And that was the good news. There was no surprise," Rosenstock said. "Whenever markets dislike something, there is a big reaction. When they like it very much and they say, 'Oh, thank you. We already knew it,' there's no reaction. That's what we actually like to see."

The question now turns to who will succeed Duisenberg in Europe's top banking job.

The leading candidate remains French National Bank President Jean-Claude Trichet. Trichet was France's original nominee in 1998 to head the bank and enjoys widespread backing among the 12 euro-zone states.

Trichet's candidacy is clouded, however, by a domestic bank scandal involving the alleged falsification of Credit Lyonnais accounts during the 1990s. Trichet was a leading official at the French Treasury at the time.

Judges are expected soon to decide whether to hold a trial in the matter. Observers say any proof that Trichet acted improperly would probably doom his chances at the ECB.

Other possible successors include ECB Vice President Christian Noyer, French Finance Minister Laurent Fabius, Luxembourg Prime Minister Jean-Claude Juncker, and Belgian Finance Minister Didier Reynolds.

Rosenstock and others say they do not expect a messy fight on the succession question, such as the behind-the-scenes battle between Germany and France that preceded Duisenberg in the post in 1998.

At the time, France was backing Trichet and only withdrew his name at the last minute after strong objections from Germany. The fight cast a shadow over the introduction of the euro and called into question the bank's independence from member governments.

Rosenstock said the nationality question this time around has been solved. Duisenberg's successor will be French.

"The choice [of successor] is really narrow. There's not going to be the big fight like there was in May 1998 because the nationality question has been solved, ever since May '98," Rosenstock said. "So, it is going to be a French person. Therefore, the potential for a clash -- like we had in May '98 -- is not there."

Rosenstock said the only question will come if France cannot find a suitable candidate or nominates someone that other ECB members find objectionable. But he said the risk of that is minor.

Duisenberg will leave a mixed record as the ECB's first president.

He will be credited with overseeing the successful launch of the common euro currency as an accounting unit in 1999, and as a real currency at the start of 2002.

He will also be praised for keeping inflation under control within the 12-nation euro-zone and for establishing a tradition of the bank's independence from the political influence of member states.

But his detractors point to a steady stream of gaffes and misstatements that they say undermined the value of the euro at a sensitive time, as well as the ECB's perceived competence with respect to its main rival, the U.S. Federal Reserve.

Duisenberg in 2001 also underestimated the effects on Europe of the U.S. economic slowdown. In March, as the U.S. economy was rapidly entering recession, Duisenberg announced that there were "no convincing signs" that the slowdown would have a significant effect on the euro-zone. That belief, some say, led the ECB to be too slow in cutting interest rates to stimulate the Western European economy.

But Rosenstock said that, in the end, Duisenberg's legacy will be positive.

"In the end, I think [Duisenberg will be seen] in a favorable light. Well, of course he had his gaffes and weak performances in between," Rosenstock said. "Nevertheless, I think he will be remembered as the first ECB president who had helped to establish a very strong 'corp spirit' at the top -- within the [bank's governing] council -- and somebody who was able to foster consensus."

He said that, in his opinion, Duisenberg committed no big mistakes. He said in the perspective of history, the gaffes and misstatements will fade away and all that will count will be the big decisions.

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