Christine Lagarde has said she will leave the European Central Bank in February 2027, and the race to replace her has started. But the headline contest between a Dutchman and a Spaniard hides the bigger one. Governments are not choosing a president. They are dividing up the top of the ECB.
The front-runners are Klaas Knot, the former Dutch central bank governor, and Pablo Hernández de Cos, who now heads the Bank for International Settlements. Knot is seen as the more hawkish of the two and is favoured by northern countries, who argue that after two French presidents and one Italian it is time for a northern European. His record counts against him in the south: he has opposed some of the unconventional tools, including bond-buying programmes, and that could lead southern governments to build a blocking minority.
The same logic works in reverse. Northern capitals could block Hernández de Cos, and a stalemate between the two camps would open the way for a dark horse. Appointments need a qualified majority, at least 16 euro-area countries representing 65% of the population, after the European Parliament and the ECB have been consulted. European Council President António Costa said the process would begin immediately and "proceed without delay".
The ECB has now asked leaders to begin choosing a successor to Lane, whose term as chief economist ends in 2027. Isabel Schnabel, the German board member who runs market operations, leaves in January. Counting Lagarde, three board seats open in the first half of next year. A fourth could follow, depending on the result.
The outcomes interlock. A Knot presidency would probably put France in line for the chief economist job, which Paris reportedly wants, keep market operations in German hands and open a supervisory seat for Spain. It would also push Dutch board member Frank Elderson, a lawyer, to resign, because the Netherlands cannot hold two seats. A win for Hernández de Cos could reshuffle the posts and leave Elderson in place. A dovish president, meanwhile, would weaken the case for a southern chief economist, which is seen as the second most powerful job in the building.
Berlin has promised a German candidate for Schnabel's seat. Finance minister Lars Klingbeil said the government was still discussing which name should go to which position.
EU leaders meet three times before the end of the year, and officials want the whole jigsaw settled by December, before Schnabel goes in January and Lagarde in February. Lagarde leaves her successor a new bout of inflation to tame, an economy that has long trailed the United States, and the risk of bond-market turmoil in her home country.
Markets will price the president's name first. But the real power may sit in the package. If governments trade seats the way they have in the past, the ECB's policy stance for the next eight years could be set in a hotel corridor by three finance ministers, with the central bank itself reduced to waiting for a result. Watch two things: whether Berlin names its candidate before the November leaders' meeting, and whether Paris or Madrid chooses to fight for the presidency or settle for the chief economist job.
