Merz interviews Knot, Hernández de Cos for ECB presidency

German Chancellor Friedrich Merz has personally interviewed both frontrunners to succeed Christine Lagarde as president of the European Central Bank. He met former Dutch central bank chief Klaas Knot first and then Pablo Hernández de Cos, the former governor of the Bank of Spain, Handelsblatt reported on Monday, citing people familiar with the matter. According to the newspaper, the meetings show that Merz has taken direct charge of the eurozone's most powerful job, and they are among several signs that a decision is close.bloomberg.com

The talks follow an early October report from Bloomberg that the meetings were planned. That report said Berlin was no longer considering a nomination for Bundesbank President Joachim Nagel. Handelsblatt reported that Nagel has not had a one-on-one meeting with Merz on the subject, and that the government seems set not to seek the presidency for a German. Some in central banking circles call that "self-dwarfing."bnrnews.bg

A package deal takes shape

The presidency is one of three ECB board jobs that could be decided together. Isabel Schnabel leaves in early January for the International Monetary Fund, and chief economist Philip Lane's term ends in May. Euro area finance ministers have pushed back the deadline for Schnabel nominations by one month, to Nov. 27, Handelsblatt said. The newspaper reported that French President Emmanuel Macron appears to favor Knot as president, with a French candidate getting the chief economist job in return.handelsblatt.com

Lagarde's term formally runs until October 2027. However, Reuters reported that the World Economic Forum's board could name her its next chair at a Nov. 2 meeting. An early exit would let leaders choose her successor before France's spring presidential election. Hernández de Cos has also contacted European capitals and is seeking meetings with Merz and Macron, El País reported.elpais.com+1

French bond turmoil raises the stakes

A sell-off in French debt has hung over the race. As Bloomberg's Craig Stirling put it, Europe needs a central bank chief "who can take on the market vigilantes." France's 10-year yield reached its highest level since 2002 last week. Its premium over German Bunds was the widest since the 2011 debt crisis, Reuters reported, as the country struggled with a large deficit and civil unrest.bloomberg.com+1

The sell-off paused on Monday after Moody's ↗ 0.21% kept France's Aa3 rating, BNN Bloomberg reported, and markets turned to the ECB's policy decision on Thursday. The candidates offer different strengths. Knot is seen as a crisis manager who leans toward higher rates, while Hernández de Cos is known as a macroeconomist who favors looser policy, Handelsblatt noted. With a possible euro crisis in mind, the paper wrote, Germany may be content with the markets portfolio, which would manage any new bond purchases.bnnbloomberg.ca+1