Changes at the ECB

Dünya Executive - - REPORT - Steve Barrow, strateg st, Standard Bank

Eurogroup finance ministers will launch the process to find a successor to ECB Vice President Vitor Constancio, who leaves at the end of May. The favourite for Constancio’s job is Spanish Economy Minister Luis de Guindos. Will European markets be bothered about Constancio’s replacemen­t? We think it will. The context in which it is of importance relates to the geographic­al distributi­on of key ECB positions along with the issue of just whose ‘turn’ it is to head up the central bank. If the position of vice president goes to a Spaniard it will arguably do two things: first, it makes it hard to believe that the president’s seat can be filled by somebody else from the Southern euro zone countries. Secondly, with a northern euro zone president seemingly likely to be chosen and, with the French and Dutch already having had a turn at the presidency, we suspect that Germany stands in pole position to be given the ECB’s reins in close to 18 months’ time. There are two points to be made here: The market will be full of speculatio­n this year as to the likely victor in the presidenti­al race with this speculatio­n only likely to intensify once the vice president is chosen in. Such speculatio­n could lift yields and the euro this year. The appointmen­t of a new president also coincides with the time at which the market seems to think the ECB will be starting to lift rates. (January 19)

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