FRANKFURT: Mario Draghi leaves the European Central Bank at the end of the month, and that may give opponents of his ultra-easy monetary policy a chance to shift the tone of the debate at the top of the institution.
Draghi pushed through a decision to resume the ECB’s €2.6 trillion bond-buying program last month, despite opposition from more than a third of the 25 members of the Governing Council.
His departure on Oct 31 gives this growing legion of skeptics from countries such as Germany, France and the Netherlands hope of shifting the balance of power at the top of the ECB under its new president, Christine Lagarde.
Herself a Frenchwoman, Lagarde will work with a largely new Executive Board, the six-person team who prepares Governing Council meetings and puts monetary policy into practice.
All the main supporters of Draghi's first stimulus package have left or will soon leave the board. Key portfolios, including that of overseeing the bond-buying program, are up for grabs.
"The dynamic will be quite different and the ECB will become a much more difficult institution to read and understand," said David Owen, chief European economist at Jefferies.
The first big test is likely to come next year, when the ECB nears a limit on owning more than a third of Germany's outstanding debt under its quantitative-easing program (QE).
For most of his mandate, Draghi could count on his deputy, Vitor Constancio, and chief economist, Peter Praet, to support him internally and explain his dovish message to investors. Most of the Governing Council took its cue from an authoritative trio of economists at the top.
But come Nov 1, Philip Lane will be the only trained economist on the board who backed the new bond purchases at the last policy meeting.
Lagarde, a politician like her deputy Luis de Guindos, has struck a balanced tone, saying accommodative policy was necessary but also that it had side effects that needed monitoring.
This creates room for skeptics of QE to be heard, particularly if Germany picks a heavyweight economist to replace Sabine Lautenschlaeger, the banking supervisor who unexpectedly quit last week.
German academic Isabel Schnabel, Bundesbank vice-president Claudia Buch and former ECB economist Marcel Fratzscher are among those who might take Lautenschlaeger's seat.
"In this phase, Germany needs someone who can speak and argue with some authority on monetary policy," said Alessandro Merli, a fellow at SAIS Europe Johns Hopkins University. "Therefore, Lautenschlaeger was not of much use in the Executive Board."
Euro zone ministers begin selecting Lautenschlaeger's successor next week and want to have a new board member in place by January. The tight deadline suggests Berlin may already have someone in mind.
The often-overlooked distribution of portfolios among board members is likely to be key, in particular those held by Benoit Coeure as head of the ECB's market operations and representative at international fora.
The only candidate to replace Coeure on Jan 1 is Italy's Fabio Panetta, who rarely voiced an opinion on monetary policy and last represented his country on the ECB's banking supervision arm.
Board members are supposed to have the good of the euro zone as a whole in mind, but they are put forward by their national governments and their views are sometime tinged by national interests, such as favouring bond purchases and low interest rates where the government is more indebted.
"Panetta can be expected to take a typically dovish Italian viewpoint, thus supporting open-ended asset purchases for as long as core inflation is expected to remain sub-target," Daiwa's economists said in a note to clients.
But Germany is also likely to stake a claim on Coeure's portfolios, and Lagarde could split or combine responsibilities among board members as she pleases.
That could prove crucial when the new president follows through on her promise to review the ECB's policy strategy and tools. Such a wide-reaching undertaking could even see the bank redefine its inflation target, now less than but close to 2 per cent.
"Lagarde could face some pressure to reallocate part of the responsibilities to more hawkish members, including when it comes to reshaping monetary policy in the upcoming strategy review," Frederik Ducrozet, a strategist at Pictet Wealth Management, said.