EZB President’s Office More Important for Germany Than EU Commission Presidency

After the European elections, the European Council must propose a candidate for president of the Commission to the European Parliament. With the end of Mario Draghi’s term as president of the European Central Bank (ECB), another important position in the EU is to be filled in the following months. With Manfred Weber and Jens Weidmann, there are promising German candidates for both offices. However, it is deemed impossible that both positions will be filled by Germans. Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance”, comments on these pending decisions following the European elections.

“For Germany, the president’s office of the ECB has more economic importance than that of the EU Commission. Although the Commission has the legislative initiative in EU legislation, any law ultimately requires the approval of the Council and Parliament. The difficult majority situation in the European Parliament will restrict the room for manoeuvre of the next Commission president to such an extent that his own political convictions are of little relevance. This is fundamentally different in the case of the ECB. The ECB Governing Council is fully independent of the Parliament and the Council in all monetary policy decisions. Since 2010, this has also included decisions on the purchase of government bonds from eurozone countries.

It is not unlikely that the next ECB President will have to deal with an Italian debt crisis during his eight-year term. The question of whether the ECB will then buy Italian government bonds on a large scale is of great financial relevance for Germany. Under Mario Draghi, the ECB has already purchased Italian government bonds worth 370 billion and is now financing 16 per cent of the country’s total public debt. Assigning a president of the ECB who, like Jens Weidmann, is critical of bond purchases, reduces the danger of the ECB introducing comprehensive transfers for highly indebted euro states.

Even though the president has only one vote in the Governing Council, his role as opinion leader has a huge impact on decision-making, as Mario Draghi demonstrated. The Federal Government should therefore reconsider its personnel strategy and clearly claim the ECB president’s seat for Jens Weidmann.”