ECB's game of musical chairs

A major overhaul of the ECB’s six-seat Executive Board looms in 2027, with three seats changing hands between May and December at the latest, including those of the president and chief economist. Speculation about President Lagarde leaving before her term ends in October 2027 has intensified, as she has kept the possibility open. Chief economist Philip Lane leaves in May, followed by market operations head Isabel Schnabel in December. However, Schnabel will leave early on 3 January 2027 for a senior IMF job. In this piece, we assess the candidates, policy implications and appointment process.

There are few firm rules in the ECB’s game of musical chairs, but the seats are politically important and prestigious for euro area governments. Historically, compromises have balanced northern and southern euro area representation on the board. As the euro area has expanded, the balance between eastern and western countries has also gained importance. However, Croatia’s Boris Vujčić has already become vice-president and is the first Executive Board member from a country that joined the EU after 2004, partly addressing eastern Europe’s claim to a seat in this round. Historically, large euro area countries have dominated the Board, as the charts to the right show.

Against this backdrop, attention is turning to the contest for the three seats, particularly the presidency. Although formally separate, the appointments are likely to be closely linked to preserve the political balance. Another French president looks unlikely, as France has already held the presidency twice. Germany’s chances are also slim because it already holds two key EU positions, namely Ursula von der Leyen as President of the Commission and Claudia Buch as head of ECB banking supervision. Germany could still put forward Bundesbank President Nagel for ECB President, but the two mostmentioned candidates are Klaas Knot, former head of the Dutch central bank and FSB chair, and Pablo Hernández de Cos, now BIS General Manager and formerly governor of the Bank of Spain. Both candidates are officially endorsed by their respective governments.

Klaas Knot is typically seen as a pragmatic hawk, while de Cos is seen as a moderate dove relative to President Lagarde, whom we view as neutral. Knot explicitly criticised the ECB’s September 2019 policy decisions, particularly the open-ended restart of QE. In 2022, he was the first GC member to say publicly that the bank should raise interest rates. However, we see him as pragmatic and data-driven, as he later revised, for example, his initial criticism of Draghi’s “whatever it takes” policy, unlike Bundesbank President Weidmann.

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