• IMF Contenders Line Up After Kohlers Surprise Exit...
• Size Matters On The ECB Board
• Gold Sale Controversies Continue Despite The New Pact
• Banque De France Calls Idea "Crazy"
• ECB To Build "Palace In The Sky"
• ECB Calls For More Spending
• Euro Central Bank Profits Under Pressure
• Central Banks Bettle With The Counterfeiters
• Balkans Join Forces To Catch Olympic Counterfeiters
• Central Bankers Search For Missing Notes
• Serbia's Jelasic Moves In
• Dinkic's Budget
• Chile's Governor Dreams Of "Deep Reform"
• Leaning Into The Wind...
• Got Change For A Million?
• Vanhala Retires And Finnish Search Starts
• Central Bank "Soldier" Takes His Leave
• Jarai Jittery Over Euro
• Avoiding The "E" Word

IMF CONTENDERS LINE UP AFTER KÖHLERS SURPRISE EXIT...
Horst Köhler's decision on Thursday March 4 to step down a year early from the IMF to accept a nomination to become German president has aroused a lot of speculation as to who will replace him as head at the Fund. Spaniard Rodrigo Rato seemed to have it all sewn up until the Socialists came to power this weekend - the question now is whether the new prime minister, Jose Luis Rodriguez Zapatero, would rather propose a conservative Spaniard to no Spaniard at all.

Still, it's always nice to be mentioned as a candidate for a top job and several prominent finance chiefs will have been gratified to see they have not been forgotten yet. A new round of horse-trading seems set to emerge as European states vie for their turn to have a national at the head of this international organisation. It seems everyone wants to prove they have a man fit for the job - with candidates being proposed from Ireland, Italy and Belgium amongst others. Competency in the job is not always the first qualification that comes to mind when looking at governments' official candidates.

The probable exit of frontrunner Rato, means the French government may push their man, Jean Lemierre, a former head of the Treasury who has been the president of the European Bank of Reconstruction and Development since 2000. The French, who until four years ago had held the top post at the Fund for many years, and who already have a national heading the ECB, had not been pushing their candidate.

Tradition has it that the European states decide a new candidate between them, however, for those looking on the tradition may appear, to say the least, frustrating. So if the Europeans can't come up with a credible candidate soon there will be calls within the Fund to look further afield - possibly to South America or Asia. The pressure is on…

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SIZE MATTERS ON THE ECB BOARD
More euro-jostling continues in the selection of a replacement for Domingo Solans on the ECB executive board. EU finance ministers postponed a decision on March 9 as tensions between large and small EU states persisted.

Solans steps down from the six-person board on May 31. Countries have been lining up the cream of their financial crop to take over the prestigious post. The three remaining candidates are Ireland's Michael Tutty, Belgium's Peter Praet and Spain's José Manuel Gonzalez-Paramo.

In the ongoing battle of the big v little, larger states have sided with the Spanish candidate to ensure that the big economies are always represented. Ireland and Belgium are among the four eurozone countries yet to be represented on the board.

The big guns had been thrown into disarray when Rato seemed all lined up to be the next chief at the Fund as two Spaniards awarded top slots at the same time may have been too much. Now Rato's chances look slimmer at the Fund, so do Ireland's and Belgium's on the board.

BANQUE DE FRANCE CALLS IDEA "CRAZY"

Christian Noyer, the new head of the Banque de France, is believed to be furious with fellow ECB governor Ernst Welteke for having raised this subject. Now the French politicians are on the trail. After Raffarin took up the idea, backing the sale of "gold surplus stocks to finance research" under the slogan "today's gold for tommorrow's gold" on March 4, Laurent Fabius, former Socialist Finance Minister, suggested that gold should be sold to finance social housing. But the central bank signalled its opposition to selling gold for research spending. An official at the Banque de France was quoted by Les Echos, a French business newspaper, as describing the idea as "crazy."

According to Agence France Presse, Raffarin does not even have universal support in his party for the idea. "I don't think it's a good idea," said Philippe Marini, head of the Senate Finance Commission, who belongs to Raffarin's centre right UMP party. Adding that "there's no miracle formula" for public spending, he voiced opposition to "selling the family jewels to round off researchers' monthly pay-cheques."

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ECB TO BUILD "PALACE IN THE SKY"

The winning designs for the new ECB premises feature twin towers spectacularly twisted and conjoined by a glass atrium with central bankers transported from one side to the other on moving floors and escalators. On the 40th floor, there will be a "palace in the sky" , a flying-saucer shaped protrusion that will house the holy of holies, the ECB boardroom, where giddy officials will ponder key monetary-policy decisions for the eurozone while contemplating the environs of Frankfurt spread out below them..

At ground level, the entrance and a conference centre will be created in a 1920s fruit and vegetable market which will be "left untouched".

The brief for the architectural competition says "public buildings are conveyors of meaning and this one in particular symbolises the European monetary union and our currency, the euro." The jury's comment on the winning design was "this concept has an intelligent combination of old and new in a sculptural form." The cost will be €100m.

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ECB CALLS FOR MORE SPENDING
It's not often you hear central bankers calling for people to go out and enjoy themselves, but that's the message coming from the ECB these days. And the secret? Confidence.

Confidence. Confidence. Confidence. Say it enough times and people will believe it; Jean-Claude Trichet practiced his English pronunciation of the word 17 times as he faced down a barrage of questions following the interest rate decision on March 4. Confidence is what the European economy is lacking at the moment, the president said, and European citizens should have more faith in their new central bank, their new currency and go out and spend.

Spend!

"We feel it is our responsibility to tell the citizens, our fellow citizens, you can have confidence, we are here, the situation is under control, perhaps more so than you think. It is time for you, if you wish and if you are hampered only by these fears, it is time for you to consume, it is time for you to invest." The governing council tries to be "confidence-inspiring" and "one of the ways we have to improve confidence is to say, well, there is an ECB, it is there, you can be sure that your purchasing power will be protected over time, not only today or tomorrow, but over time."

How reassuring. With the euro notes now bearing Trichet's signature no one can say he does not put his money where his mouth is.

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EURO CENTRAL BANK PROFITS UNDER PRESSURE
In an indication of the increasing strains on balance sheets of central banks in the euro area, the Bundesbank reportedly saw its annual profit fall to less than €1bn ($1.2bn) last year as a result of the strong euro, which depresses the value of dollar-denominated assets. The Bundesbank transfers most of its annual profits to the government and Berlin had been hoping for around €3.5bn for last year. So with less than one billion in profits from the Bundesbank, the government will have a cash shortfall of some €2.5bn in its 2004 budget, equivalent to about 10% of total new borrowing planned for this year, according to Handelsblatt.

The finance ministry refused to comment on the information. The official figures are scheduled to be published on March 24.

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CENTRAL BANKS BETTLE WITH THE COUNTERFEITERS
The ease with which your friendly PC can be used to print out reasonable copies of banknotes has long been a worry for central bankers. Now the Central Bank Counterfeit Deterrence Group has developed a new system to prevent personal computers and digital imaging tools from being used to make phoney banknotes. The Bank for International Settlements, in whose headquarters the group's secretariat is located, reported on Tuesday March 9 that major hardware and software manufacturers have voluntarily opted to use this technology.

The statement from the BIS claimed that the system consists of "anticounterfeiting technologies which prevent personal computers and digital imaging tools from capturing or reproducing the image of a protected bank note". No difference will be made to the effectiveness of personal computers in any other respect.

Twenty-seven central banks and note-printing authorities are members of the Central Bank Counterfeit Deterrence Group.

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BALKANS JOIN FORCES TO CATCH OLYMPIC COUNTERFEITERS
Senior Greek central bankers and police officers travel to Bulgaria this week to help authorities there to crack down on gangs who may -intelligence sources say - try to produce counterfeit US dollars and euro notes in Athens during the games when about 1.5m overseas visitors are expected in the city. Greek and Bulgarian officials will be holding talks in Sofia, the Bulgarian capital, to discuss means of coordinating police efforts to fight the counterfeit gangs. Experts from the ECB will also attend.

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CENTRAL BANKERS SEARCH FOR MISSING NOTES
Spanish central bankers are attempting to locate 41m bank notes of the largest denomination - €500 ($785) - that have been issued since the euro became legal tender. Unsurprisingly shopkeepers do not accept these notes, so Spaniards do not carry them in their wallets - presumably using them instead to stash undeclared earnings. One Bank of Spain economist is quoted as saying "we know they exist but no one has ever seen them."

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SERBIA'S JELASIC MOVES IN
The new governor of the National Bank of Serbia, Radovan Jelasic, took office on Monday March 1 with remarks to the staff that said all the usual things that central bankers are expected to say on such occasions. The goal of the NBS would be to maintain the stability of prices and the country's financial system. To that end, he said there would be a stable monetary policy, unobstructed payment operations, responsible management of foreign currency reserves and overall regulation of the banking system.

The former governor, Kori Udovicki, said she had been honoured to work for the central bank and wished the new management success. Jelasic thanked Udovicki and the outgoing governing council for their responsible management. He was a deputy governor under Udovicki's predecessor, Mladjan Dinkic, who is now finance minister.

Udovicki was ousted as governor of the central bank after Serbia's new parliament annulled her election. She had been nominated for the post by the Democratic Party, which has since fallen out with the rest of Serbia's pro-reform bloc and has been excluded from the coalition government led by Vojislav Kostunica, leader of the Democratic Party of Serbia, another reformist party.

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DINKIC'S BUDGET
Mladjan Dinkic, predecessor to Udovicki as governor of the National Bank of Serbia and now finance minister, has announced that Serbia's long-overdue 2004 budget must be adopted by the end of March.

He told press "this will be an anti-recession budget because the previous one was largely responsible for the crisis we are now in." He has said that a raft of new tax laws will be adopted in the second quarter that will reduce and abolish some taxes and create institutions to underwrite banking loans in order to stimulate banking growth.

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CHILE'S GOVERNOR DREAMS OF "DEEP REFORM"
I suppose there's nothing wrong with being optimistic, even in Latin American central banking. Vittorio Corbo, governor of the Central Bank of Chile, wants "deep reform" of Latin American institutions and strong policies to recover from the "lost decade" of the 1980s and recent disruptions that have affected some of the largest economies in the region.

In a recent talk, he said "we don't have to invent anything new", claiming that the implementation of long-needed reforms would serve the area better than searching for any quick cures to the continued economic stagnation.

Strong institutions, he claimed, must be developed in order to protect the region's econ Strong institutions, he claimed, must be developed in order to protect the region's economies from contagion and shocks. He also cited fiscal responsibility, flexible exchange rates, more openness to trade and better access to markets in developed economies as crucial to Latin American economic success. omies from contagion and shocks. He also cited fiscal responsibility, flexible exchange rates, more openness to trade and better access to markets in developed economies as crucial to Latin American economic success.

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LEANING INTO THE WIND...
Tom de Swaan, former executive director at the Dutch central bank and a current member of the board of the UK Financial Services Authority has taken the helm of a new project at ABN Amro, where he is now chief finance officer. He is overseeing the bank's efforts in next year's Volvo Ocean Race, the biggest round-the-world yacht race.

The bank is doing all it can to ensure that chance plays as small a part in the project as possible - drawing up a strategy for nautical success that any economist would be proud of. It is investing €20m to build two boats for the competition - risk assessment having shown that not only will having two boats halve the likelihood that the logo is lost somewhere in the pacific, but also that lessons from designing and building the first boat can be used to optimise the performance of the second boat.

Coupled with investment in top boat builders it seems the former central banker is keen to prove that leaving fortune to the winds is a thing of the past.

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GOT CHANGE FOR A MILLION?
It must have been annoying for Alice Pike to have to break a note to pay for a relatively insubstantial amount. On being told at the check-out that her $2.32 gift vouchers would not cover the bill, Pike reached into her wallet for something larger…

The cashier at a branch of Wall-Mart in the US had to ring for assistance when the 35-year-old Pike handed over a $1m note to pay for her $1,671.55 of groceries. Rather than being handed $998,328.45 in change, Pike was arrested by the police for forgery.

Pike claims that she was given the note (and two more that were later found on her), by her husband and believed them to be real. The US treasury does not issue any notes larger than $100. Notes with higher denominations of $500, $1000 and $10,000 are still in circulation, but have not been printed since 1969 due to under-utilisation.

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VANHALA RETIRES AND FINNISH SEARCH STARTS
Matti Vanhala, governor of the Bank of Finland since 1998, is retiring to receive treatment for cancer. Matti Louekoski, a deputy governor, will take over the reins until a new governor is appointed to the job, which brings with it a seat on the ECB's rate-setting governing council.

In a tribute to his work on behalf of the ECB and the common European currency, Jean-Claude Trichet has issued a statement saying that Vanhala has made an important contribution to the work of the ECB council ever since it was set up.

The search for a successor has already started and the parliamentary supervisory council, a cross-party committee, will draw up a short list of names for the government amid calls from industry and economists for the new chief to be picked for his economic abilities and not as a result of political concerns.

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CENTRAL BANK "SOLDIER" TAKES HIS LEAVE
A quiet man of central banking in America is retiring. After more than a decade in the post, J. Alfred Broaddus Jr., president of the Federal Reserve Bank of Richmond and a firm supporter of Alan Greenspan, is hanging up his boots. Understated and low key, Broaddus has won high praise for his record. "He sort of set the standard for how you would want a bank president measured," said David Jones, an economist who has written several books about the Fed. "I call him a solid central bank soldier."

It seems, however, that the long-term central banker has had enough of strategy planning for the time being. When asked how he planned to spend the next several years he replied "beats me."

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JARAI JITTERY OVER EURO
Is Zsigmond Jarai, governor of the National Bank of Hungary, wise to air his concerns about the Hungarian euro accession? His reservations somewhat pre-empt the government decision on whether to keep to the 2008 target for entry scheduled for the end of April. Jarai was more than a little hesitant at the prospect of 2008 entry. He claimed that at present the necessary support was not in place either from politicians, society, trade unionists or economists - a fairly comprehensive list. However, Jarai also advised against frequent shifting of the euro accession target as posing problems for the stability of the country.

"Theoretically, it is still possible to meet the criteria necessary for the introduction of the euro in 2008," he said this week. But, "this will only be possible by making considerable macroeconomic sacrifices." He added that the central bank continues to argue for the earliest possible adoption of the euro.

Meanwhile, such internal debates in accession countries often seem to ignore the ECB's clear ruling that even to join ERM II (the first stage towards adopting the euro, and a stage that lasts a minimum of two years) countries are expected to have completed basic policy adjustments. The ECB clearly wants them to take their time: "Given the risks implied by premature rigidity of the exchange rate, it might be appropriate for some new member states to only consider applying for ERM II membership after a further degree of convergence has been achieved."

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AVIODING THE "E" WORD
Keith Vaz, a former Europe minister in Britain's Labour government, has been counting how many times ministers have talked about the euro recently. Between June last year and the beginning of February, Tony Blair referred to it in two of his 11 speeches, John Prescott (deputy prime minister) did not mention it at all and Patricia Hewitt, the trade secretary, devoted three of her 23 speeches to it. Gordon Brown, the chancellor of the exchequer, mentioned the euro in half of his 11 speeches but as the Financial Times put it, Brown tends to use the word "no" in close proximity to the word "euro". "We will never win the argument if we are scared to speak out on it," said Vaz.

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