Joachim Nagel, a compromise choice for the presidency of the Bundesbank

The Bundesbank, the German central bank, has its next president: Joachim Nagel, 55, has been proposed by the new chancellor, Olaf Scholz (Social Democratic Party, SPD), and the finance minister, Christian Lindner (Liberal Party, FDP), to replace Jens Weidmann, who announced at the end of October that he would leave the institution at the end of the year, six years before the end of his mandate. The appointment is expected to be confirmed at the ministerial cabinet meeting on Wednesday, December 22.

Mr. Nagel arrives at the head of the Bundesbank, and therefore at the board of governors of the European Central Bank (ECB), at a particularly delicate moment: the current inflationary pressures re-launch the debate, sensitive in Germany, on the stability of the currency common. This appointment puts an end to several weeks of speculation on the name of Mr. Weidmann’s successor. The latter had not hidden, upon the announcement of his departure, his deep concerns about the sharp rise in prices observed in Germany and the consequences considered risky of the accommodating policy of the ECB.

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Throughout his mandate, this close friend of Angela Merkel, nicknamed “Mr. No” within the European institution, had been the guardian, sometimes inflexible, of a monetary policy favoring price stability and ‘strict independence of the ECB, in the pure so-called “ordoliberal” German tradition embodied by the Bundesbank. This approach, often marginalized within the Governing Council of the ECB in recent years, is also increasingly discussed in Germany by certain economists more anchored in international debates than their elders.

Two sensitive questions

Isabel Schnabel, member of the ECB’s executive board, whose name has long been mentioned to take over from Mr. Weidmann, is emblematic of this pragmatic trend. The controversy runs through the government itself: within the tripartite coalition in power in Berlin, the social democrats of the SPD and the Greens are more inclined to support an accommodating monetary policy to support the most fragile states in view of the current challenges , the liberals of the FDP being faithful to the orthodox approach.

Which candidate would Mr Scholz choose to lead the German central bank? As is often the case in Germany, it was a compromise candidate who won the votes. Joachim Nagel is a member of Olaf Scholz’s party, the SPD, but he also appeals to the Minister of Finance, Christian Lindner, for his ordoliberal positions expressed in the past. Mr Lindner posted a tweet on Monday morning praising Mr Nagel’s experience, “Which ensures continuity” of the Bundesbank. “In view of the risks of inflation, the importance of a monetary policy geared to stability is growing”, he writes.

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Joachim Nagel, a compromise choice for the presidency of the Bundesbank