Madrid backs De Cos for ECB presidency

Christine Lagarde has until October 2027 left as president of the European Central Bank. In theory, that should leave plenty of time. In practice, the contest to replace her has already moved into the back rooms of European capitals.

The trigger came in February, when Euronews reported that Lagarde may leave early, before the French presidential election in April 2027. That would give Emmanuel Macron and German Chancellor Friedrich Merz a chance to shape the succession while both still have the power to do so. The ECB’s answer was careful: Lagarde "has not taken any decision regarding the end of her term." That leaves the question open.

Two candidates have moved to the front of the field: Klaas Knot, president of the Dutch central bank, and Pablo Hernández de Cos, Spain’s former central bank governor, who now runs the BIS, the Bank for International Settlements, which coordinates work between the world’s central banks. An OMFIF survey in April put them level. A Financial Times poll of economists had them as joint favourites. The real contest is less between the men than between the governments trying to place them.

Madrid’s candidate, and the governor trying to stop him

Spain’s push for De Cos has been anything but tidy. Pedro Sánchez was slow to back a man appointed by his predecessor, Mariano Rajoy, and whose Bank of Spain reports repeatedly criticised the government’s fiscal record (El Debate). According to Vozpópuli, Carlos Cuerpo, the economy minister, spent weeks pressing the case internally before Sánchez came around.

The government is now lined up behind De Cos, though it has avoided a formal public endorsement. That is deliberate. Madrid is treating the campaign as something to be managed quietly, not announced from a podium (Cinco Días).

The harder problem is at home. José Luis Escrivá, the current Bank of Spain governor, is working against De Cos, speaking to journalists and other central bank governors across Europe in an effort to weaken the bid (El Debate). The reason is simple enough: if De Cos becomes ECB president, Spain cannot also expect to hold a seat on the Executive Board. Escrivá’s own route would close.

Berlin’s quiet bet

Germany has a candidate in public view. Isabel Schnabel, already on the ECB’s Executive Board, told Reuters she would take the presidency "if asked" (WirtschaftsWoche). Her problem is political. She is seen as an aggressive hawk, willing to press for higher rates even as growth weakens, which makes her difficult for southern governments with heavy debt burdens to support.

In May, Econostream reported that Germany sees Knot as the "optimal fallback", describing him as "stability-oriented, deeply experienced, fiscally serious." That suits Merz’s ordoliberal instincts: the German tradition of rule-based discipline, sound money and price stability as the anchor of economic policy.

France, meanwhile, appears to have stepped back. Villeroy de Galhau resigned early as Banque de France governor and was replaced by Emmanuel Moulin, a Macron loyalist who only narrowly survived parliamentary confirmation (Le Monde). No French candidate for the ECB presidency has emerged. After Jean-Claude Trichet and then Lagarde, Paris seems ready to accept that the job will move elsewhere.

What the choice shapes

The ECB president does not set interest rates alone, but the office matters. The president shapes consensus on rates and decides when to activate the TPI, the Transmission Protection Instrument, which allows the ECB to buy government bonds to stop borrowing costs from surging in countries such as Italy or Greece.

Italy’s spread over Germany, the gap between what each country pays to borrow, is at a 15-year low of around 73-76 basis points. That calm rests partly on markets believing the ECB backstop is real. For eurozone countries, including Ireland, the credibility of that backstop is part of the wider architecture that keeps borrowing conditions from turning political stress into a debt crisis.

De Cos is usually classified by analysts as a centrist with a dovish tilt, meaning he is more inclined towards lower rates when growth is under pressure. He has consistently backed the TPI and gradual rate adjustments throughout his career (BIS). Knot was once among the ECB’s most vocal hawks. He has softened in recent years, but his instinct still runs towards tighter policy.

Formally, the European Council appoints the ECB president by qualified majority after consulting the European Parliament and the ECB’s Governing Council (Consilium). In reality, every ECB presidency has been settled as part of a wider bargain over top EU jobs. Nationality usually counts for more than ideology.

Spain has never held the ECB presidency. Since Luis de Guindos left the Executive Board on May 31, Madrid has no representation there either. That is the argument Spain will bring to the table. Whether it works will depend on the deal Madrid can strike, and whether it can stop its own central bank governor from damaging the bid before the serious bargaining begins.