Spain economy minister confident will win ECB vice president post

FILE PHOTO:Spain's Economy Minister de Guindos speaks during an interview with Reuters at Economy Ministry in Madrid
FILE PHOTO: Spain's Economy Minister Luis de Guindos speaks during an interview with Reuters at Economy Ministry in Madrid, Spain October 5, 2017. REUTERS/Sergio Perez/File Photo

February 7, 2018

By Paul Day

MADRID (Reuters) – Spain’s Economy Minister Luis de Guindos on Wednesday said he was confident he would be offered the vice-presidency of the European Central Bank, with Ireland’s central bank governor Philip Lane the only other candidate.

The final decision will not be taken for a number of weeks but senior euro zone sources told Reuters the Spanish economy minister was a clear favorite to replace Portugal’s Vitor Constancio, whose eight-year term ends May 31.

The race to be the ECB’s number two kicks off two years of change within the bank’s executive board, which consists of four board members, the vice president and president and it will set the tone for the fight for the ECB’s top job.

Wednesday is the deadline for candidates and only Lane and de Guindos have applied.

“The prime minister and myself have received support and we believe that there is a very clear possibility of me being elected,” de Guindos said during a conference in Madrid.

Markets are watching to see who will take the second most senior position at the bank, which controls monetary policy for the 19-country euro zone and is preparing to replace Italy’s Mario Draghi at the helm next year.

“As the ECB’s focus shifts towards an unwinding of accommodative monetary policy, the market is focusing more on individual speakers in an attempt to gauge how the exit will take shape,” BofA Merrill Lynch said in an investors note.

The Working Group (EWG) of deputy finance ministers and treasurers who prepare Eurogroup meetings will meet on Thursday to discuss who to back for the position. Euro zone finance ministers will vote on Feb. 19 for the ECB candidate, ahead of a European Parliament hearing and final appointment by EU leaders.

De Guindos, 58, may face some opposition due to his close alignment with hardline German positions throughout the European economic crisis.

Meanwhile, euro zone sources contacted by Reuters have expressed concerns that his election as a southern European from a so-called periphery economy could mean, in the name of balance, Draghi would be replaced by a northern European from a core economy in 2019.

Lane’s selection would be first time Ireland was represented on the ECB board since the euro zone’s inception in 1999. Spain was represented in Frankfurt by Jose Manuel Gonzalez Paramo until he left in 2012.

POLITICIAN VS ECONOMIST

De Guindos has been Spain’s economy minister since the conservative People’s Party (PP), headed by Prime Minister Mariano Rajoy, won the 2011 election and has helped steer the country though its worst economic crisis in decades.

Before taking the helm at the Economy Ministry, de Guindos worked as a head of the financial sector in PricewaterhouseCoopers in Madrid and as head of Nomura Securities and Lehman Brothers in the Iberian peninsular before that.

Under him as economy minister, European authorities orchestrated a rescue of Spain’s then sixth-biggest lender, Banco Popular, in early June 2017, the first time a bank in the euro zone was wound down according to the new resolution framework. The ECB became the single supervisor for around 120 banks in the euro zone in November of 2014.

At a time when the ECB is working on a draft of new measures targeting soured loans on bank balance sheets, de Guindos can be credited for helping Spain’s financial sector reduce its non-performing loans to around 8 percent.

Lane, meanwhile, has acted as an academic consultant for the European Commission, International Monetary Fund, World Bank and a number of central banks, including the ECB.

The European Parliament is also calling for governments to propose a female candidate and Spain’s Socialists called on Tuesday for Rajoy to propose a female technocrat. There is one woman on the six-member board and two on the ECB’s 25-member governing council.

(Additional reporting by Jesus Aguado, Jan Strupczewski and Carlos Ruano; Editing by Matthew Mpoke Bigg)