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The ECB is getting a new deputy, but don’t expect a hawkish change of tone

As Europe's leaders prepared to choose a new vice president for the continent’s central bank, the campaign for the appointment proved brief and anything but hard-fought.

The successful candidate was Luis de Guindos, Spain’s current minister for the economy.

Finance ministers from the 19 countries that use the euro met yesterday to decide between two candidates: de Guindos, and the governor of Ireland’s central bank, Philip Lane.

Last week, both men had testified privately before members of the European Parliament, and based on the public comments that followed those appearances, the assembled lawmakers sounded far more enamoured with the Irishman.

But those parliamentarians enjoyed a merely consultative role in the selection process, and the winds of national interest seemed to favour the Spaniard.

De Guindos is a politician’s politician – at turns charming and outspoken, while also a dispenser of bon mots at international gatherings.

But he does not shy away from voicing carefully calibrated criticisms, with Catalonia’s pro-independence movement – and its impact on the wider Spanish economy – a frequent target for his ostensible ire in recent months.

The nakedly partisan nature of his discourse and behaviour puts him slightly at odds with the European Central Bank’s (ECB) nominally apolitical nature, and this raised concerns among some of Europe’s political parties.

De Guindos’ career in the private sector ended with him holding the can as the head of Lehman Brothers’ operations in Spain and Portugal when the parent bank kicked the bucket in 2008.

Meanwhile, Philip Lane is a relative newcomer to the international scene, with a much lower profile – having only taken over the governorship of Ireland’s Banc Ceannais in late 2015. His academic and advisory experience in global macroeconomics is extensive, and includes years of consultative work with the Asian Development Bank, OECD, the International Monetary Fund, and World Bank.

While the Irish government had been publicly extolling his suitability for the past few weeks, the campaign appeared to be waged too half-heartedly or too late to dislodge the frontrunner.

And just hours before an informal Eurogroup vote last night, Irish finance minister Paschal Donohoe announced he would withdraw Lane’s candidacy for the position.

De Guindos’ views on monetary policy might be less documented than those of a widely-published academic economist like Lane, but in a recent interview the Spaniard said that he thinks the central bank’s bond-buying policy and low interest rate environment have undoubtedly helped to drive Europe’s growth.

He added that inflation will rise close to two per cent in the near future, and insisted positive economic indicators should encourage Europe’s integration.

ECB watchers should not expect the Spaniard to diverge too strongly from the approach promoted by his likely future boss — the Italian described by a recent guest on our TV channel as “do everything possible (Mario) Draghi”.

But judging by his record in bailout-rescued Spain, it’s likely de Guindos’ political experience will colour his approach to the new job, and as of now his selection seems all but guaranteed.

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