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Spain’s De Guindos in line for ECB job after Irish candidate withdraws

Irish central bank chief Philip Lane pulled out of the race for the vice-presidency of the European Central Bank on Monday, leaving favourite Spanish Economy Minister Luis De Guindos the only candidate.

Published: 19 February 2018 15:43 CET

Spain's De Guindos in line for ECB job after Irish candidate withdraws

Photo: AFP

Eurozone finance ministers were widely expected to pick their Spanish peer for the top job, the first of a series of changes at the ECB over the coming two years, including the post of the chief of the bank currently held by Italian Mario Draghi.

“I will be withdrawing Philip's name and I have spoken to Minister De Guindos and wished him the best of luck this evening,” Irish Finance Minister Paschal Donohoe said as he arrived for talks to fill the post with his
eurozone counterparts.

The ministers “will make a decision tonight that will be in the best interest of the functioning and success of the European Central Bank,” he added.

The choice comes despite the scepticism of senior European lawmakers who said they preferred Lane, who is not a politician, over his rival after an informal hearing last week.

MEPs raise concerns over de Guindos as ECB candidate

EU leaders will ultimately choose the successor to Portugal's Vitor Constancio, whose eight-year mandate expires in May, as the ECB's number two.

That decision will be taken on March 22 at an EU summit after consultations with the European Parliament and the ECB's Governing Council.

De Guindos, a veteran of eurozone economic policy, said this month he was “convinced” he will have enough support to clinch the post after Madrid officially nominated him for the job.

De Guindos defended his candidacy, saying he was the longest-serving member of the Eurogroup, which groups eurozone finance ministers.

He has served as economy minister since Prime Minister Mariano Rajoy's conservative government came to power in 2011.

As economy minister he oversaw the clean-up of Spain's banking industry that collapsed after a housing boom imploded during the worst of the eurozone debt crisis.

In exchange Spain had to impose tough austerity measures to reduce the county's public deficit.

Before entering the government, De Guindos led the Iberian unit of Lehman Brothers between 2006 and 2008 before the investment bank collapsed.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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