One minute and seventeen seconds, Christian Lindner doesn’t need longer, until everything is said from his point of view. The Federal Minister of Finance and FDP boss has between “Hello everyone, greetings” and “Merry Christmas and a good start into the new year, bye!” definitely to proclaim things of weight. Because already on Monday morning it became known that the government had agreed on a new Bundesbank president. Joachim Nagel, 55, is to succeed Jens Weidmann, who is leaving office voluntarily at the end of the year.
In the afternoon, Lindner said that Nagel was “an experienced personality” and that he would “stand for monetary policy continuity in the Bundesbank”. One is “in times of increased attention to inflation,” he adds in a twisted way. Monetary policy stability “in the tradition of the Bundesbank” is important, and he is certain that Nagel will “position the German Bundesbank in exactly this way”. A “good cast,” he says, and “a good signal” both to the German population and to Europe.
In the long history of the institution, the new Bundesbank President will once again be a man. Important women in powerful offices, with whom Joachim Nagel, 55, will work in the future, congratulate on Twitter: ECB President Christine Lagarde is very pleased to work with “such an experienced central banker”. Isabel Schnabel, ECB director and one of the failed candidates to succeed Weidmann, welcomed Nagel on board and referred to “the many important tasks that lie ahead of us”.
This brings a week-long staff debate to an end that no one would have expected until recently. Because Weidmann, who will receive his discharge certificate from Federal President Frank-Walter Steinmeier at Bellevue Palace this Tuesday, asked for his discharge on October 20, completely surprising. He asserted personal reasons, at the same time he warned of inflation risks, which should be taken more seriously by the ECB. With this bang, the new federal government got a problem before even the coalition agreement was finished. Which monetary policy signal would the traffic light want to send with this person? One of continuity or one of change?
Then we heard of an intra-coalition meeting, especially between the SPD and FDP. The Social Democrats have secured the right to propose the Weidmann successor, but with the proviso that the FDP approves the person. The appointment was only made informally, i.e. without a note in the coalition agreement. Which is all the more astonishing since the right of the Greens to propose the next German EU Commissioner is clearly recorded in the coalition agreement.
On Monday it was said in Berlin that the FDP had fed Nagel into the follow-up debate, but officially he was an SPD proposal. Lindner, in turn, tweeted that morning that he and Chancellor Olaf Scholz had proposed Nagel. And at noon a government spokesman said: “I can confirm that Federal Finance Minister Christian Lindner has proposed the economist Joachim Nagel as the new President of the Deutsche Bundesbank.” The cabinet is expected to discuss this on December 22nd.
In the eurozone, inflation is now 5.2 percent, higher than ever before
From the point of view of the SPD and FDP, Nagel actually has something of an ideal candidate. He is a member of the SPD and is stability-oriented in monetary policy issues. This would pacify both the social democratic side and that of the FDP; the liberals want to portray themselves as the financial stability anchor of the traffic light coalition.
However, other candidates were definitely in discussion. The current ECB director, Isabel Schnabel, was seen as promising. Your appointment would have been a signal that Berlin is reaching for the presidency of the European Central Bank (ECB) in the medium term. If Schnabel had moved to the Bundesbank, she would have had a better chance of succeeding Lagarde in six years – a direct change from the director’s office to the top of the ECB is not possible according to the statute. However, it was heard that Schnabel would have been the Greens’ favorite rather than the SPD. Achim Post, parliamentary group vice-president of the SPD, praised Nagel on Monday as “excellently suited to both ensuring monetary stability in the coming years and enabling European growth after the corona crisis”. He is “the right president at the right time”.
Many refer to Nagel as “Bundesbank veterans” because he began his career there and made it to the board of directors. “Veteran” initially sounds like experience, that is, positive. But it also creates other images that are not in harmony with modernity and progress for everyone. But when it comes to ambitions for the important office, one should not underestimate the always calm and prudent behavior of Nagel. He has the expertise of an accomplished monetary politician, as the experts unanimously attest to him. You can’t blame him for not knowing his way around. ECB boss Lagarde has had to struggle with this prejudice since taking office because she is not an economist but a lawyer. In Germany, inflation is now 5.2 percent, in the euro zone 4.9 percent – higher than ever in the history of monetary union. Now the ECB also had to correct its own forecasts to 3.2 percent next year; significantly higher than the target value. The criticism of Lagarde’s course of continuing the loose monetary policy is growing – but it is not a majority in the Governing Council.
The Germans and the ECB is also a story of giving up
How will Nagel position itself there? Beat the drum like the former Bundesbank President Axel Weber did in 2010 – only to resign later out of frustration? Appear in a controlled and perfectly formed manner with clever arguments in the highest ECB body, as Weidmann practiced for a good ten years – but finally rejected it? The Germans and the ECB is also a story of giving up: With Jürgen Stark, Sabine Lautenschläger and Jörg Asmussen, three German ECB directors have already failed to fulfill their contracts.
Nagel made a career at the Bundesbank before moving to the KfW State Bank and most recently to the Bank for International Settlements (BIZ). Such a person, who has absorbed the myth of the Bundesbank as the patron saint of the strong D-Mark, should not ignore the increasing loss of power of this institution in the Eurosystem. But what to do if the other central bankers disagree? In a conversation more than ten years ago, when Nagel was responsible for the financial markets as the Bundesbank board member, he said that as a Bundesbanker you shouldn’t speculate about what you would do if something specific happened. Instead, you always have to see the specific situation and then make new decisions.
Because a Bundesbanker is not yet a banker, Nagel first had to prove himself after moving to KfW in 2017. If you have no relevant professional experience, the financial supervisory authority Bafin will not just let you into one of the management bodies of a bank. And so Nagel served as General Manager for a year before taking on international business, including development cooperation, on the KfW Executive Board. At the end of 2019, the Board of Directors of the State Bank extended its contract prematurely. He was even in talks to succeed the KfW boss Günther Bräunig, who left in the summer. From the bank, however, it has long been said: The monetary watchdog Nagel had not gotten really warm with his new role.
Now he’s back in his old one.