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Arise
, Papademos
Now, at long last, a successor for Christian Noyer,
vice president of the ECB, has been announced. European
Union finance ministers decided that Lucas Papademos,
governor of the Bank of Greece, was the most appropriate
candidate to fill the first vacancy on the ECB's executive
board since its creation four years ago. Belgium's candidate,
Paul de Grauwe, will be disappointed but Papademos blushingly
admitted to be "pleased and honoured" to have been chosen.
Wim Duisenberg breathed a sigh of relief at the decision:
"I am very happy that we have a timely proposal for
the succession of Noyer." Let's hope the nomination
of his own successor runs as smoothly! (Duisenberg has
said he will step down in July 2003).
Papademos's
nomination must still be approved by the European Parliament
(on 22 April) before EU leaders confirm his appointment
when they meet in Seville in June. Possibly Papademos's
experience at the Boston Federal Reserve and his standing
as a former MIT academic alongside Franco Modigliani
tipped the balance in his favour - some say that this
will put him in a good position to make European monetary
policy easier to decipher for the US. Also, he is credited
with being one of the driving forces behind the Greek
economy's transformation allowing it to join the euro.
When interviewed
for Central Banking journal back in 1995 he made clear
he was determined to press on with the rationalisation
of the Greek economy and he has done an excellent job.
He is seen as an orthodox central banker, well versed
in the ECB's strategy, and unlikely to rock the boat.
In short,
his shining academic qualifications together with plenty
of hands-on experience means that Papademos perfectly
fits the template for the modern central banker.
But the proceedings
did not pass by without a little excitement. There was
concern that Belgium had not endorsed Papademos's appointment.
Belgium's finance minister, Didier Reynders, abstained
from an otherwise unanimous decision, although the Belgians
have since been quick to play this down and write it
off as having no significance. Alain Gerlache, a spokesman
at the prime minister's office, said, "We will not block
the appointment. Our decision to abstain was due to
the fact that we had our own candidate. It was not meant
at all to block the decision."
Cynics have
alleged that Belgium only nominated Paul De Grauwe for
this appointment to put down a marker for their man
to succeed the Finnish ECB director Sirkka Hamalainen
when she comes to the end of her term, at about the
same time as Duisenburg. Even more controversially,
some have been saying that Paul De Grauwe is a pawn
in a longer-term game in which Peter Praet, currently
a director in the Belgian National Bank, is the real
candidate the Belgians hope to sit on the ECB executive
board (which has six full time members).
The media
leapt on the chance to invent a Belgian plot to secure
a place on the ECB board, reporting that Belgium intended
to veto Jean-Claude Trichet next year from succeeding
Duisenberg unless a national from the Benelux countries
(Belgium, Luxembourg or the Netherlands) gets a seat
on the ECB board. Reynders, referring to a deal agreed
in 1998 that promised France that its candidate would
become ECB president before the end of Duisenberg's
full term in office, said: "I do not deny that there
is an agreement between Chirac and Duisenberg. I do
deny that it is binding on the Belgian government… There
is no demand from Belgium for us to agree on the name
of a candidate or the name of a country, but there is
a demand that we take account of the place of Benelux
in new decisions on the bank's executive committee."
But Luxembourg's
prime minister, Jean-Claude Juncker, has made quite
clear that "there is consensus among EU governments
that a Frenchman will replace Wim Duisenberg at the
helm of the ECB… Neither dreaming nor wide awake can
I imagine anyone would block a French candidate for
the ECB presidency, or even try do so."
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His Successor
?
Papademos's transferral to the ECB will leave central
bankers in Greece deprived of their star player - so they
will be looking for another to replace him. The Greek
press has touted Panagiotis Thomopoulos or Nick Garganas
as possible contenders. They are both currently deputy
governors of the central bank. Nick Paleokrassas, a member
of the central bank's monetary policy council, is a likely
candidate to edge into the post of deputy governor. |
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Israel
's Governor Threatens Resignation
The beleaguered Bank of Israel's governor Dr David Klein
has made no bones about his feelings on the government's
plan to enforce a rather strange and frankly unhealthy
regime on the central bank. Klein has said he will have
to "consider his future" if the Bank of Israel Law is
revised according to the finance ministry's proposals.
The plans would "change in an extreme way the reality
in which the bank functions" according to Klein. The
proposed changes would create a seven-member monetary
panel comprised of Klein, two other central bank representatives
and four outsiders.
Klein warned
that the central bank would become politicised and contaminated
with vested interests. In a recent speech, Klein made
some damning criticisms of the proposed law. In particular,
he said that the clause that would subject the bank's
goal of price stability to "the policies of the government
and its decisions" must be dumped. He counselled the
government to shelve clauses making the central bank
a mere "agent" of the government in managing the state's
foreign currency reserves. Klein brushed off suggestions
that the plan for a monetary council was an attempt
by the finance ministry to force him to resign, noting
that there was no need to destroy the bank's independence
for "such a minor aim".
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Russian
Reshuffle
Continuing an incipient trend of change at the central
bank of Russia after the switch of chairman last month,
the bank's board of directors is to undergo a radical
overhaul. Three new members, Oleg Vyugin, Andrei Kozlov
and Nadezha Ivanova, have been appointed, and await
only an official approval from parliament next week.
Sergei Ignatyev, the central bank's fledgling chairman,
made these nominations, which have been wholeheartedly
approved by President Putin.
Vyugin and
Kozlov will serve as first deputy chairmen, both with
experience in the private sector. Vyugin is to oversee
the bank's monetary and credit policy while Kozlov will
be in charge of regulation of the Russian banking sector.
Vyugin served previously as executive vice president
of Troika Dialog investment company, although he also
worked in the finance ministry from 1993 to 1999, including
serving as the first deputy finance minister. Kozlov
worked at the central bank from 1989 to 1999, reaching
the rank of first deputy chairman from 1997 to 1999.
Ivanova currently acts as director of the bank's joint
economic department.
But watch
out for further changes: Ignatyev has hinted that he
will nominate more candidates in the near future, as
there are currently five vacant seats out of 13 available
on the board. It has been speculated that Duma deputy
Pavel Medvedev may find himself offered a place, while
the federal government and the presidential administration
may also tender their own representatives for the board
- possibly deputy director of the financial department
of the governmental staff Anton Drozdov and deputy finance
minister Sergei Kolotukhin representing the former,
and director of the economic department Anton Danilov-Danilyan
representing the latter. Of course, a few of the old
guard will be squeezed out, and it looks like current
first deputy chairperson Tatyana Paramonova may take
charge of Sberbank now that its former president Andrey
Kazmin has been dismissed.
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Faith
In Reserves
A well-meaning Buddhist monk has been busy beefing up
the Thai central bank's foreign exchange reserves. During
the course of the last four years by his own efforts he
has increased reserves by a hefty 2.4bn baht (US$55.5m).
Perhaps for reasons of pride, or just plain embarrassment,
the bank will accept no further payments from Luangta
Maha Bua who has just added a further 40 gold bars to
the banks coffers which he gathered from public donations.
The bank's governor, Pridiyathorn Devakula, said this
would be the last contribution from this startling character,
revered throughout the land. He has been campaigning since
1997 to buttress the bank's reserves, and with some success.
According to Devakula, "Last year, he asked me whether
the country's foreign reserves were adequate. I told him
they had been much strengthened, and there was no need
to seek additional funds. But he said the public's faith
was strong, and that people still wanted to make donations."
Devakula says Thailand's foreign reserves are now quite
adequate at US$36.6bn. |
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Misinformation
In Iran
Contrary to what had been widely reported in the Iranian
press and even found its way into the Financial Times
- and, unfortunately, featured in the last issue of Newsmakers
- Iran's judiciary has denied its supposed plans to summon
either the central bank governor, Dr Mohsen Nourbakhsh,
or the oil minister to court to face corruption charges.
An official in the judiciary confirmed: "We have heard
these reports, but no one from the judiciary has given
out such information and, as far as I know, the judiciary
does not have such a plan to summon these people." Nourkbakhsh
himself denied the rumours. I would add that I did attempt
to contact the Iranian central bank at the time to check
out these reports, but did not receive a reply until it
was too late. A spokesman later told me that the bank
"strongly refutes" the allegation, and that its governor
"has never been called by any court of law", which we
were pleased to discover. |
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Zambian
Governor Is "Retired"
The governor of the central bank of Zambia, Dr Jacob
Mwanza, has had his term cut short. The president of
Zambia did not make explicit his motives for replacing
him. Mwanza, who is 65, was only two years into his
second five-year term when the new Zambian president,
Levy Mwanawasa, appointed Dr Caleb Fundanga in his place.
The president wished Mwanza well, saying that he hoped
that he would use his experience and exposure in the
private sector.
Fundanga
was previously a senior adviser to the president of
the African Development Bank where he was the executive
director. Before that he served as permanent secretary
at the cabinet office in charge of economic affairs,
as well as the ministry of finance. Fundanga has also
been a lecturer at the University of Zambia. In an official
statement, it was explained: "With this appointment
the president wants to demonstrate his resolve to seek
the expertise and experience of Zambians wherever they
might be."
Fundanga's
appointment follows a string of other newly appointed
officials since President Mwanawasa's election last
December. This represents the last link in the chain
of a new economic team he has built at the expense of
several big cheeses in Zambia who were, like Mwanza,
"retired". Mwanza commented in January that he wanted
to serve out his term, although "with a new leader,
regardless of the contract and security of tenure, one
would have to make way if the president asks one to
do so." The president has also appointed a new finance
minister, and heads to the Treasury, Zambia Revenue
Authority and Zambia Privatisation Agency.
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Central
Bankerly Reticence
John Taylor is showing at least some of the hallmarks
of a true central banker. He was asked by a reporter from
the Wall Street Journal, quite directly, whether he would
consider accepting Greenspan's job if approached. He answered
as follows: "Monetary policy responded to the (US) slowdown,
interest rates were cut and our policies have been working
well through the whole length of the 1990s and back to
the 1980s. That's what the message should be: things are
working very well and the evidence for that is there in
many different places." One could devote long hours to
attempting to extract hidden meaning from this answer,
but it would be time wasted. There is none: Taylor can
provide an answer to unanswerable and basically ridiculous
questions, while managing to slip in coherent thoughts
on monetary policy at the same time. This much will be
in his favour in the search for Greenspan's heir. |
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