ECB's Schnabel Departure Sparks Board Reshuffle and IMF Move
Leadership Changes and Political Implications at the European Central Bank
By Balazs Koranyi and Francesco Canepa
Isabel Schnabel's Resignation and IMF Appointment
FRANKFURT, Sept 24 (Reuters) - European Central Bank board member Isabel Schnabel resigned on Thursday to take on a senior role at the International Monetary Fund, kicking off a lengthy reshuffle atop Europe's most powerful financial institution.
Germany's Schnabel, the head of the ECB's market operations, will leave effective January 3, a year before her eight-year term was set to expire, to become the new director of the IMF's market department, a post vacated by the August 31 departure of Tobias Adrian
"The Governing Council has decided that no cooling-off period is required," the ECB said in a statement. "Ms Schnabel will not be involved in any matters related to the IMF for the remainder of her term at the ECB."
Board Reshuffle and Political Chess
Schnabel's resignation sets in motion what is likely to be a complicated game of political chess for coveted roles as ECB chief economist Philip Lane is set to leave next May and ECB President Christine Lagarde, herself a subject of persistent resignation rumours, will depart by next October, at the latest.
Broader Political Deals for Board Seats
This suggests that Schnabel's replacement will be part of a broader political deal, rather than a singular appointment, as Germany, Spain, the Netherlands and France are all vying for powerful board seats.
Policy Continuity Amid Turnover
The turnover at the top of the bank is unlikely to significantly impact policy in the near term, however, as most of those vying for top jobs have been close to the bank for years.
Market Expectations and Interest Rates
This is why markets still expect the ECB to keep raising interest rates to combat a pick up in inflation, with the next move seen most likely in December.
Contenders and Country Positions
While technically any country can contest Schnabel's seat, the bloc's top three - Germany, France and Italy - have a de facto permanent seat on the board.
Germany's Strategic Considerations
However, if Germany would simply replace Schnabel with another candidate, it would mean Berlin is essentially giving up on contesting Lagarde's seat.
This is why sources close to the matter say that any deal over Schnabel's replacement is likely to involve the other two positions as well.
Spain, Netherlands, and France: Board Ambitions
Spain is lobbying for Bank for International Settlements General Manager Pablo Hernandez de Cos to become the next ECB President while the Netherlands is pushing for Klaas Knot, its former central bank chief.
Germany was contemplating Bundesbank President Joachim Nagel for the presidency but its commitment appears to have weakened recently and it may go for a different job.
Potential Domino Effect on Board Composition
Adding to the political chess, the appointment of Knot would likely force Frank Elderson, another Dutchman, to resign from the board as per custom. That would open up a fourth board seat, meaning that two-thirds of the ECB board is replaced in quick succession.
France's Bid for Chief Economist Role
Meanwhile France, which has already given the ECB two presidents with Lagarde and Jean-Claude Trichet, is hoping to nab the chief economist position, sources said earlier.
(Reporting by Balazs Koranyi and Francesco Canepa; Editing by Susan Fenton and Alexandra Hudson)
