Knot, De Cos set up two-man race for ECB presidency

Spain and the Netherlands each put forward a former central bank governor on Friday, November 6, to succeed Christine Lagarde as president of the European Central Bank. That sets up a two-man race between Pablo Hernández de Cos and Klaas Knot. Eurogroup President Kyriakos Pierrakakis announced the two candidacies in a statement and said euro zone finance ministers "will take stock of these candidacies" at their meeting on November 9, Reuters reported. No one else came forward before the 5 p.m. Brussels deadline, which was expected, according to Politico Europe.politico.eu+1

Lagarde steps down on February 7, eight months before her term was due to end. The winner will take over as the ECB raises interest rates to fight inflation, while worries about French debt have raised the prospect that the bank may eventually have to intervene in bond markets, Reuters noted.rmb.reuters.com

Two veteran central bankers

De Cos led the Bank of Spain from 2018 to 2024 and now runs the Bank for International Settlements. In a letter to Pierrakakis, Spanish Deputy Prime Minister Carlos Cuerpo said he was "confident" that De Cos would bring "the same steady hand and inspiring leadership" to the ECB, Reuters reported. The Dutch government named Knot, its former central bank chief, earlier in the week, RTÉ reported.reuters.com+1

Analysts don't expect big policy differences between the two. "Simplistically, Knot is seen as slightly more hawkish and de Cos slightly more dovish, although we would not overplay the policy differences between the two," said Modupe Adegbembo of Jefferies, according to Reuters.rmb.reuters.com

A wider reshuffle

The presidency is linked to two other upcoming vacancies on the ECB's executive board. Germany wants to keep the seat Isabel Schnabel leaves on January 3, and France is aiming for the chief economist post when Philip Lane's term ends on May 31, Politico Europe reported. Economists told Reuters that Knot's chances improve if France gets the chief economist job, and De Cos's improve if Germany gets it. Choosing Knot would likely also force Dutch board member Frank Elderson to resign, which could open a seat for Spain, Reuters said.politico.eu+1

Gender balance could complicate the process too. Lagarde and Schnabel are currently the only two women on the 27-member Governing Council, Bloomberg noted. If Germany backs De Cos, it would probably need to nominate a woman for Schnabel's seat.finance.yahoo.com

Next steps

The final decision rests with EU leaders. They will meet at an informal summit on November 13 and a special one on November 26-27, and nominations for Schnabel's seat close on November 27, Bloomberg reported. Diplomats expect the bargaining to begin at the Dublin summit, according to Politico Europe. Bloomberg also noted that a surprise late candidate could still appear, as Lagarde herself did in 2019.finance.yahoo.com+1