ECB boss to step down

February 7, 2002 Posted: 1824 GMT

LONDON (CNN) -- Wim Duisenberg, the controversial president of the European Central Bank, plans to step down in July 2003, three years before his term ends.

True to his style, Duisenberg's decision – announced on Thursday – took many by surprise and overshadowed a critical monetary policy meeting of the ECB itself.

And it came after months of uncertainty, and debate, over how long Duisenberg, 66, would stay in office and who would succeed him.

The ECB said the Dutchman's decision to step down was in line with his 1998 declaration before taking office that he would not serve his full term. "In view of his age he did not want to serve the full eight-year term as president," the ECB said in a statement.

Duisenberg renewed debate over his future during a year-end interview on Dutch television, in which he denied there were any plans for him to step down before the end of the year.

The head of the Dutch central bank was appointed to an eight-year term as ECB president in May 1998.

That decision by European Union leaders came despite opposition from French President Jacques Chirac, who wanted Bank of France Governor Jean-Claude Trichet to have the job.

The compromise, according to Chirac, was a "gentlemen's agreement" whereby Duisenberg would make way for Trichet, or another French representative, midway through his term in June 2002.

Duisenberg has always disputed Chirac's version of events. His official position is that he would stand down sometime before the end of his term in mid-2006 due to his age. But he has also said he might retire after the introduction of euro notes and coins, which led to speculation that he may leave sooner rather than later.

"On the plus side, Duisenberg's chosen his own timing," Steven Englander, a global currency strategist at Citibank, told Reuters. "The minus is that there's going to be a lot of speculation as to who replaces him."

Trichet is still the most likely replacement for Duisenberg, although France could nominate someone else for the job. But Trichet, who is also a member of the bank's governing council, has declined to discuss any succession for the top job.

However, Trichet's candidacy is clouded by uncertainty surrounding an investigation into his connection with the near collapse of the French bank Credit Lyonnais in the early 1990s.

Also being touted as possible candidates are French Finance Minister Laurent Fabius and ECB chief economist Otmar Issing.

A decision on Duisenberg's successor is expected to be announced sometime in March. Whoever wins the job, it is unlikely to make much of a difference to monetary policy.

"It's very unlikely that ECB policy is going to change with any of the likely successors," Citibank's Englander said.

That's because many of the decisions are made collectively, unlike the U.S. Federal Reserve where chairman Alan Greenspan is seen as having a key influence in policy direction.

This has led to criticism of the ECB, and Duisenberg in particular, for failing to move quickly and decisively to stem the eurozone's economic downturn. Despite rising unemployment and a weakening manufacturing sector, the central bank has been reluctant to lower interest rates.

In 2001, the ECB cut rates just four times, while the U.S. Fed cut 11 times and the Bank of England seven times.  

"There have been times in the last three years when the ECB really needed to grip the policy nettle, when benign neglect tended to prevail," according to investment bank Bear Stearns.

"What the euro really needs is a European Greenspan. Time to advertise in the jobs vacant column."