Successor to Christine Lagarde: The race to head the ECB has begun

The race for the future leadership of the European Central Bank (ECB) in Frankfurt is on. After ECB boss Christine Lagarde announced her early resignation, the eurozone finance ministers viewed the field of applicants for the first time in Brussels on Monday. Two candidates from Spain and the Netherlands are considered the favorites: Pablo Hernández de Cos, who heads the Bank for International Settlements (BIS), and Klaas Knot, who was president of the Dutch central bank until 2025. Both candidates were presented to the Eurogroup by their respective finance ministers.

Time is of the essence: Lagarde wants to resign from office on February 7th - around eight months before the regular end of her term of office. The Frenchwoman would like to enable a change at the top of the ECB just in time for the French presidential election in April. This election could be won by nationalist leader Marine Le Pen, who is considered a sharp critic of the euro and the EU - a horror scenario for the ECB. In order to prevent a crisis in the central bank, the Europeans want to decide on Lagarde's successor this year.

According to EU rules, eurozone finance ministers must first recommend a candidate who then faces a hearing in the European Parliament. The actual nomination is then a matter for the heads of state and government, including Chancellor Friedrich Merz.

The German head of government could now theoretically reach out to the top of the ECB and nominate his own candidate. Germany has never occupied the highest office in the ECB Tower in Frankfurt. However, there is a handicap: the EU Commission is led by CDU politician Ursula von der Leyen. In the opinion of the other member states, two Germans in top positions in the EU would be too much of a good thing. That is why Merz is unlikely to nominate his own candidate for the leadership of the ECB - especially since the candidates to succeed Lagarde are certainly to German tastes.

This is especially true for the Dutchman Knot. The 59-year-old stands for a tight monetary policy: In the ECB Council, he openly opposed what was at times very loose monetary policy. This puts him on the traditionally hard line of the German Bundesbank. But Germany could also live well with the Spaniard Hernández de Cos. Before his current job at the BIS, which acts as the central bank of central banks, he was head of the Spanish central bank between 2018 and 2024 and in this role was also a member of the Governing Council of the ECB.

What speaks for Hernández de Cos is that Spain has never held the presidency of the ECB, said VP Bank chief economist Thomas Gitzel to the news agency dpa. The Spaniard stands for a loose monetary policy. However, this is not necessarily a problem: “A moderate monetary policymaker is likely to be preferred by many governments at the moment.”

The background is the high level of debt in many EU states and concerns about a debt crisis in countries like France or Belgium. Loan interest rates there have reached their highest level in 20 years; in some cases they are even higher than in Greece or Italy.

Further rising interest rates would make debt servicing even more expensive and possibly overwhelm some countries. Therefore, at least the highly indebted countries are likely to prefer a loose monetary policy. However, the head of the ECB does not decide on this alone. The chief economist also has a say. There are now signs of a competition between Germany and France for this position in the second row. In the end, a personnel package should be put together that takes all interests into account, according to Brussels.

It is not yet possible to predict when that will happen. As always, we will probably have to wait for an EU summit, explained Eurogroup leader Kyriakos Pierrakakis. The meeting of the finance ministers on Monday was primarily about an initial exchange of information.

Mixed signals came from the European Parliament. Lagarde's successor should not only worry about monetary stability, demands SPD MP Matthias Ecke. Europe is facing new monetary and monetary policy realities, said Ecke: “The affordability of life must be the focus here.”

In contrast, CSU economic politician Markus Ferber calls for a “clear commitment to price stability”. The ECB's inflation target of 2 percent has been missed for months. “The head of the ECB needs someone who recognizes inflation risks early on and has the courage to make unpopular decisions,” said Ferber.