>> GROUP: Shadow ECB Council / EZB-Schattenrat  Dr. Sylvain Broyer

Dr. Sylvain Broyer: The job description for the next ECB president entails three main tasks: normalize monetary policy; resist further overburdening of monetary policy; work towards developing the international role of the euro.

As regards the normalization task, its process will not only depend on the course set by the Fed. A high degree of intellectual agility will be required, since the ECB’s “new normal” is a three-dimension artifact: driving the policy rate is one of them and adaptability might be needed to this end, should the ECB strategy be redesigned, mimicking the Fed. Setting the optimal size and duration of the ECB balance sheet are two others dimensions of the ECB’S “new normal”. Both of them are uncharted territories for the next President.

Second, the next ECB President should resist further overburdening of monetary policy. It is an evidence that the Eurozone will remain an incomplete monetary area for the next eight years, even if some progress on the Banking Union and the capital markets union can be made. The ECB will remain the masterpiece in EMU’s governance while the likelihood of an accident on this economic journey will not diminish. The difference this time is that the ECB has not the five-percentage space for its policy rate that a central bank usual needs to cushion an economic downturn. Moreover, the benefits of going behind the Zero Low Bound are not evident.

Third, the next ECB President should work with the European Commission in promoting the international role of the euro. This has become a priority for Europe to protect its interests from the extraterritoriality of US laws. The ECB has a role to play there, for instance, via pan-European payment systems - TIPS is a very good example in this sense - but also via common market infrastructures, which will become crucial to the development of a European safe asset.

Many candidates tick the boxes for this job description. The choice will depend on political aspects. It will depend first on the choice of the Commission top job, and I will be the result of a Westphalian balance of powers among country members.
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