In praise of mercenary central bankers
PARIS — Eurozone leaders could learn a thing or two from Philip Hammond. Notably, they should heed the example hes showing them on how to choose a central banker.
As Hammond reiterated recently, foreigners are allowed at the top of the Bank of England. So maybe its time for the European Central Bank to look literally outside the box and hire from abroad.
The U.K. chancellor of the exchequer hasnt yet launched the formal process of choosing a successor to Mark Carney, the BoE governor who will step down in June 2019. But Hammond has indicated how he would go about it.
It reads like a list of the things eurozone leaders should also do when choosing the replacement for ECB President Mario Draghi in November next year — but wont.
An advert will be posted for the job. Foreigners will be welcome (Carney hails from Canada). And Hammond said he would cast a wide net and was already scouting global forums such as International Monetary Fund meetings to identify potential big-impact candidates.
The choice will be influenced by other EU appointments, part of a big personnel trade-off having nothing to do with monetary policy.
Contrast that with the way the next ECB chief will be chosen: First, a secretive backroom deal between France and Germany; then confidential bargaining sessions with other eurozone members; followed by the selection of whoever is judged to meet the political balance considerations of the moment.
The choice will be influenced by other EU appointments, part of a big personnel trade-off having nothing to do with monetary policy. Meanwhile, the candidates plans, ideas and proposals on everything from quantitative easing to interest rates will remain clouded in all the ambiguity demanded by this most diplomatic of appointment processes.
Oh, and by the way, forget about a non-EU citizen getting the job.
The legal reason is that the eurozones founding treaty explicitly states that the job should be held by the national of a member country. The real, political reason is that governments are much too afraid to give the job that is the expression of their sovereignty to some outlander.
But think about it and its easy to see why the ECB would benefit from a foreign president.
Mark Carney, left, the governor of the Bank of England with his former deputy Paul Tucker | Jason Alden/AFP via Getty Images
What better way to guarantee the central banks independence, away from the permanent debate between “northern” and “southern” countries, “hawks” and “doves?” Why not appoint a mercenary, whose mission will be to meet the inflation target and, in his or her spare time, keep the eurozone together?
National football teams, after all, can be trained and managed by talented foreigners. And when you look at the global pool of academics, treasury officials, and current or former central bankers available, its clear that theres no shortage of talent to fill the job. Raghuram Rajan, a celebrated economist and former Indian central banker, and Mexicos Agustín Carstens, who heads the Bank for International Settlements, are some of the names mentioned as possible contenders for the BoE job. They could also aspire to take over the ECB.
Imagine, for example, the potential candidacy to the ECB of Elvira Nabiullina, the successful chair of the Central Bank of Russia. Surely, the woman who kept the Russian central bank independent from Vladimir Putin could succeed in resisting eurozone governments meddling in monetary policy?
Or consider another post-Brexit possibility: Wouldnt regulatory cooperation between the U.K. and the EU be much smoother if a Brit presided over the ECB while a European took over the BoE? Think of, say, former deputy BoE head Paul Tucker moving to Frankfurt, and current ECB executive board member Benoit Cœuré taking office in London.
Of course, there is still that irritating treaty thing. But as recent events have shown, anyone these days can easily buy an EU passport in Malta or Cyprus. Theres no reason this accelerated procedure to create a eurozone citizen couldnt be used for the future ECB head.
And, for once, that would be all in the name of the greater good.
Pierre Briançon is chief European economics correspondent for POLITICO.