The insider guide to ECB musical chairs

It might be premature for succession talks over the European Central Bank presidency, considering incumbent Christine Lagarde still has 18 months left in her eight-year reign.

But speculation is rife after recent reports suggested the Frenchwoman could step down ahead of her planned exit date of Oct. 31, 2027, fast-tracking the debate over who will secure the most powerful economic post in Europe.

Lagarde’s job is among three high-ranking vacancies that will emerge on the ECB’s six-person executive board next year. Eurozone leaders will have the final say on who gets a seat at the table, as part of a horse-trading exercise that considers who occupies the most influential positions in the EU — and what passports they hold.

As Brussels girds itself for the usual undignified and thoroughly untransparent horse-trading, here’s your essential and speculative guide to understanding the looming ECB race.

Who’s the favorite to succeed Lagarde?

Klaas Knot, the two-term governor of the Dutch central bank and former head of the Financial Stability Board, has all the experience and qualifications needed for the job.

A noted belt-tightening fiscal hawk in his first term, Knot softened his stance as the sovereign debt crisis was mastered, seemingly with one eye on the succession in Frankfurt.

Some of the ECB’s current top brass see him as a little too close to politicians, but that may not count against him given it’s heads of government who make the appointment.

On the minus side, Knot is currently out of the policy circuit, leaving him with no official machinery to help him campaign. That will count against him the longer the situation lasts, so anything that sounds like a starting pistol will be music to his ears.

Who’s the insider favorite?

Pablo Hernández de Cos, the former Bank of Spain governor, now running the Bank for International Settlements, is another highly qualified candidate.

De Cos restored the Bank of Spain’s reputation after years of muddled and politically compromised leadership. However, building that reputation involved criticizing Prime Minister Pedro Sánchez’s government for its timid pension reform, which may cost him political support in Madrid.

Also, moving De Cos from the standard-setting body in Basel might cost Europe a prestigious and influential seat in global finance, given the antagonism of the current U.S. administration toward Europe’s elite. Madrid has also long stated its desire to advance someone for the ECB presidency.

Where’s Germany in all this?

There’s a strong sense — at least in Berlin — that it’s Germany’s turn to have an ECB president after watching two French presidents and one Italian play fast and loose with the formidable legacy of the Bundesbank and the Deutsche Mark over the last 20 years. Three candidates could put themselves forward for the job.

Klaas Knot, the two-term governor of the Dutch central bank and former head of the Financial Stability Board, has all the experience and qualifications needed for the job. | Mateo Lanzuela/Europa Press via Getty Images

Isabel Schnabel: The ECB’s current head of markets is keen on the position and has recently developed a conspicuous penchant for upbeat, big-picture takes on Europe’s future, which may or may not be aimed at reassuring Southern Europe that she is more than just a typical German hawk.

However, precedent is against giving anyone a second term on the board and ECB insiders suggest she can be a somewhat divisive personality.

Joachim Nagel: The current Bundesbank president is a more emollient figure, but has clashed more than once with Chancellor Friedrich Merz, most recently on the thorny issue of allowing the EU to issue more joint debt.

A member of the Social Democratic Party, Merz’s junior partner in Berlin, Nagel may also be more useful to Merz in keeping the SPD onside in the debate over domestic policy than he would be across town at ECB headquarters.

Jörg Kukies: Having been finance minister under Chancellor Olaf Scholz, Kukies has all the political connections he might need to secure the job. Although an SPD member like Nagel, Kukies’ politics are highly pragmatic and are unlikely to prevent Merz from supporting him.

Isabel Schnabel, the ECB’s current head of markets is keen on the position and has recently developed a conspicuous penchant for upbeat, big-picture takes on Europe’s future.

And, like ex-ECB President Mario Draghi before him, financial markets will like the fact that he also spent years at Goldman Sachs

Who’s the fall-back option?

International Monetary Fund Managing Director Kristalina Georgieva has a decent resume but lacks the direct political patronage at the head-of-government level that would normally be needed to land the role.

However, at least her native country, Bulgaria, is now actually part of the eurozone, and no one should rule out the possibility of someone thinking of her after 16 hours of rancorous haggling in Brussels.