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Central banks 06 Aug 2018

New faces to head the ECB

The European Central Bank in 2018 began the turnover process in a number of key posts on its Executive Board. The crux will be the end of Mario Draghi’s term in office in October 2019 amid doubts about whether his departure will coincide with a hike in interest rates expected between the summer and the fall of next year.

The musical chairs began in May 2018 with the departure of vice president Vítor Constancio, which sparked a push by European countries to have one of their own replace him. The Portuguese official was eventually replaced by the Spaniard Luis de Guindos, who joined the ECB on June 1, 2018 under an eight-year mandate. De Guindos’ arrival put an end to six years without Spanish representation in the ECB’s Executive Board after the departure of José Manuel González-Páramo, now Executive Member of the Board, Head of Global Economics, Regulation and Public Affairs at BBVA.

Constancio’s replacement was the starting point for an overhaul of the ECB’s Executive Board with the next in line for replacement, Peter Praet. The Belgian economist’s term in office ends in May 2019 after eight years at the European institution.

But the key date is October 2019, when Mario Draghi’s mandate at the head of the ECB comes to a close. Since he assumed the position on November 1, 2011, the Italian has acted decisively in the most critical moments of the European economic crisis. Draghi has been the standard-bearer in the ECB’s response to the European financial storm. He has been the linchpin in the cuts in interest rates to the extent of pushing them into negative territory alongside liquidity tenders and the corporate asset and government-bond purchasing program.

Likewise, he has been the visible face of institutional reform in the creation of banking union and the concentration of the supervisory powers of European banking in the hands of the ECB. Now in the final stretch of his mandate, he faces the challenge of steering the euro-zone’s exit from non-conventional monetary policy.

Further ahead, France’s Benoît Couré leaves the ECB in January 2020 after eight years on the Executive Board. In December of the same year, it’s the turn of Luxembourg’s Yves Mersch to leave. And further on still comes the replacement of Germany’s Sabine Lautenschläger, who has been a member of the Executive Board since January 2014 and vice-chair of the Supervisory Board of the Single Supervisory Mechanism since February of the same year.

Bets are already being taken on Draghi’s replacement and this will continue over the coming months with the odds shorter on his substitute coming from some countries, such as Germany, than others. The European partners are also jockeying for position to replace Praet and Couré on the Executive Board. There are only two countries, Germany and Italy, which have had an uninterrupted presence on the Executive Board since the euro came into being. There are eight which have never had a presence: Cyprus, Slovakia, Slovenia, Estonia, Latvia, Lithuania, Ireland and Malta.

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