Leadership2 publishers3 min readPublished Updated
Merz lines up talks with both frontrunners to succeed Lagarde at the ECB
Friedrich Merz will meet Klaas Knot and Pablo Hernandez de Cos, the two frontrunners to succeed Christine Lagarde, as three ECB posts fall vacant. People familiar said Berlin has dropped Joachim Nagel and is weighing the chief economist and markets seats instead.
The Board Room · Leadership desk
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What happened
- Knot's meeting with Merz is due in the coming days and de Cos's within the next few weeks, according to people familiar with the plans.
- Lagarde said this week she would not rule out leaving "a few months" before her term ends in October 2027.
- Macron has not met either candidate, though Finance Minister Roland Lescure, his chief of staff and his EU adviser have, according to a person familiar.
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Why it matters
- decision Berlin has to choose between claiming Schnabel's markets seat in January and holding out for Lane's chief economist post in May, and the second option ties its claim to the presidency talks.
- constraint One package would link a seat the ECB wants filled from January to a presidency due to change by October 2027, so a deadlock over the top job could delay the earliest appointment.
- exposure De Cos's candidacy is exposed to Spanish politics, since Sanchez, who endorsed him, may face an election before year-end after losing a parliamentary vote.
The first appointment in the sequence is the seat Germany is vacating. Isabel Schnabel's markets post comes free in early January [6], and eurozone finance ministers could begin discussing a successor as soon as next week [7]. Schnabel is leaving for a post at the International Monetary Fund [19]. According to Bloomberg's sources, her portfolio and Philip Lane's job as chief economist are Berlin's alternatives to the presidency [17]. Lane's term ends in May [4].
That leaves Germany with a choice about order. Claiming the markets seat in January puts a German on the board early, on a known date. Waiting for Lane's post keeps the chief economist job in reach. It also leaves Germany's claim inside a negotiation that has to settle who succeeds Lagarde. Bloomberg lists Markus Brunnermeier of Princeton, Ulrike Malmendier of Berkeley, Tobias Adrian, who just left the IMF job Schnabel is taking, and former finance minister Joerg Kukies as possible German nominees [18].
The case for one package came from Athens. Greece's premier predicted last week that leaders would make "a grand bargain" to fill all three vacancies at once [5]. The Schnabel and Lane seats both open before Lagarde's term is due to end in October 2027 [1], and Lagarde said this week she would not rule out leaving "a few months" early [11]. Under a bundle, the January appointment is made with the presidency already in view. A dispute over the presidency could then hold up a seat the ECB has already asked governments to fill [6].
Paris is the other half of any deal. Bloomberg describes Germany's position as crucial and names Emmanuel Macron as the other key player [8]. France faces heightened bond-market scrutiny while his government struggles to pass a budget [8]. Bloomberg named two pressures to settle quickly: this week's bond turmoil, if it lasts [12], and possible Spanish elections before the end of the year after a parliamentary defeat for Pedro Sanchez [13]. Sanchez and the Dutch prime minister each endorsed their own national candidate last week [14]. De Cos, a former Bank of Spain governor, is general manager at the Bank for International Settlements, and Knot is a former Dutch central bank chief [15].
Two meetings with a chancellor do not settle the presidency. The account rests on people who asked not to be identified [1]. A German official, the French finance ministry and Knot declined to comment, and de Cos was not immediately available [10]. Bloomberg's own claim is narrower: it calls the meetings the clearest evidence yet of movement behind the scenes [3]. The January seat is different, because it has a date and a formal request from the ECB behind it [6].
The report does not say how Knot and de Cos differ on monetary policy. The decision due this quarter is who replaces Schnabel [6]. Next quarter, whichever post Germany takes or passes up in January will decide what is left to trade when Lane's term ends in May [4].
What to watch
- Whether eurozone finance ministers open talks on Schnabel's successor at next week's meeting, and whether a German name is put forward for her seat.
- Whether Macron meets Knot or de Cos himself, after his finance minister and senior aides already have.
- Whether Spain calls an election before year-end, and what that does to Madrid's push for de Cos.