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Asmussen's departure 'a headache for ECB'

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(FRANKFURT) - Joerg Asmussen's decision to quit the European Central Bank for politics could deprive ECB chief Mario Draghi of a powerful advocate of his policies in Germany, analysts said on Monday.

In a surprise announcement at the weekend, German Chancellor Angela Merkel revealed that Asmussen, 47, would become junior labour minister in her new coalition government, leaving his position on the ECB's executive board just two years into his eight-year contract.

The move appears to be a step down the career ladder for Asmussen who was a top German finance ministry official before joining the ECB at the start of 2012.

Asmussen is responsible for international and European relations on the ECB executive board.

But Asmussen insists the move is for personal reasons, since he wants to spend more time with his family and young children in Berlin.

At a hearing in front of the EU Parliament's economic affairs committee in Brussels on Monday, Draghi described Asmussen's decision to quit as a "tremendous loss for both the executive board and myself personally. We will miss him a lot."

And a replacement would have to be found "as soon as possible. We can't really afford to operate without a member" at such a crucial time, Draghi said.

Analysts also believed Asmussen's departure could prove something of a headache for the ECB and Draghi in particular.

It will be "a strategic loss," said Berenberg Bank economist Christian Schulz.

Asmussen is not the first top-level German official to quit the ECB.

Former Bundesbank President Axel Weber and the ECB's former chief economist Juergen Stark both left early in protest over the central bank's controversial anti-crisis policies.

"Asmussen appears to be leaving for purely personal reasons. But the departure of such an experienced European policy maker ... is a strategic loss for the ECB," said Schulz.

Asmussen had defended the ECB's policies in Germany's constitutional court against the sharp criticism from Bundesbank President Jens Weidmann.

"This leaves a gap in the ECB's communication of policy in Germany, as well as a gap of communication of the German debate into the ECB," Schulz argued.

"His successor will face the challenge of quickly establishing him- or herself as a strong and credible voice in the German and European monetary policy debate."

Bundesbank vice president Sabine Lautenschlaeger is seen as the most likely candidate.

But Claudia Buch, one of the government's independent panel of economic advisors, and the head of the BaFin banking regulator, Elke Koenig, have also been mooted as possible successors.

As Weidmann's number two at the Bundesbank, Lautenschlaeger is likely to share his conservative credentials.

"Not a huge amount is known about her stance on monetary policy, and from all accounts she will contribute towards the conservative fractions of the ECB," said IG analyst Chris Weston.

Credit Agricole analyst Frederik Ducrozet noted that Asmussen had been the ECB's key liaison with Merkel and her government, ensuring that Berlin was informed -- and also supported -- Draghi and his policies.

While Asmussen "can hardly be labelled as a monetary dove ... his replacement could still bring in some rebalancing within the ECB's governing council," Ducrozet said.

ING DiBa economist Carsten Brzeski believed that Asmussen's move to Berlin was not driven by any monetary policy conflicts.

Nevertheless, "with Asmussen's exit, the ECB will lose an important connection to both the German government and the German public. In the public debate on the ECB's monetary policy, Asmussen has been an important counterweight to Bundesbank president Weidmann," Brzeski said.

While it is not a foregone conclusion that Asmussen will be replaced by a German, ECB watchers were convinced that would be the case.

"In theory, other countries could also put forward a candidate for the succession of Asmussen but this looks highly unlikely," Brezski said.

"In our view, the nomination could take until the next spring summit of European leaders," he concluded.

Natixis economist Sylvain Broyer said he did not see any great changes in ECB policy as a result of Asmussen's departure.

He was "a very good ambassador, but he was neither a banker nor an economist," Broyer said.

But the expert warned that "things could be a little more difficult for Draghi with someone from the Bundesbank" taking Asmussen's place.

RBS economist Richard Barwell disagreed.

"It's a fair question to ask how the departure of Asmussen will change the communication strategy, but I think there is still too much emphasis on the nationality of members of the board and even the council.

"The nationality of the individual is not meant to come into the equation and yet the debate is always framed this way," Barwell said.


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