The shame for Spain
In an ideal world, everybody would lose their national passports and just become European when they arrive at the European Central Bank. In practice, nationality matters. That much was true when Jean-Claude Trichet, a Frenchman, ceased being ECB President and was replaced by Mario Draghi, an Italian. France was keen to get another countryman on the board so that it would regain its traditional two seats. Lorenzo Bini Smaghi, who by then was the third Italian on the board, was persuaded to make way.
A rerun on these musical chairs is now being played out, except that it is Spain that is trying to hang onto its second seat. This occasion has risen because Jose Manuel Gonzalez-Paramo, a Spaniard, is retiring. Madrid thought it had secured Paris’ backing for its new candidate, Antonio Sáinz de Vicuña, head of the ECB’s legal department. But France seems to have switched sides and to be now backing Yves Mersch, Luxembourg’s central bank governor. This is part of an elaborate horse-trading exercise involving other big jobs in European institutions including who would run the Eurogroup, the euro zone finance minister’s club. Germany also seems to be backing Mersch, who is hawkish on monetary policy. The Germans feel periphery countries are overrepresented in the ECB, particularly since the president is an Italian and the vice-president Portuguese.
Central bank governors for all 17 members of the euro automatically sit on the ECB’s governing council. There are then six other seats, the executive board. Until now, Germany, France, Italy and Spain – the euro zone’s big four – have always had a claim on one of these extra spots. If Mersch is chosen for Paramo’s slot, a new Luxembourg central bank governor would be appointed. The grand duchy, a country with half a million inhabitants – would have two seats. Spain, with a population of 46 million, would have just one.
Such an outcome would be a shame. Ensuring that each of the euro zone’s four largest members has two seats in the governing council adds to the institution’s legitimacy. It makes it more representative of the euro zone’s large and diverse economy. As such, keeping a second Spaniard on board should be seen as an asset. But there’s also another way of looking at it. Spanish banks have borrowed 170 billion euros from the bank, or 21 percent of the total, according to Cheuvreux estimates. It could become a liability.