Eurozone nominates Knot and de Cos to succeed Lagarde at ECB

Eurozone countries have nominated two veteran central bankers to succeed Christine Lagarde as president of the European Central Bank. Spain proposed Pablo Hernández de Cos, general manager of the Bank for International Settlements, while the Netherlands nominated Klaas Knot, president of the Dutch central bank.

The Eurogroup will assess the candidacies at its next meeting on November 9, according to Eurogroup President Kyriakos Pierrakakis. EU leaders may take weeks to choose their preferred candidate, but the nominations signal continuity at the ECB.

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Both candidates have served for years on the ECB Governing Council, which sets interest rates, or in closely related roles. They have spent most of their careers in the central banking system.

The leadership change comes at a tense time for the ECB. The bank is raising interest rates to fight inflation while concerns about debt sustainability have increased the possibility that the ECB may eventually be forced to intervene in markets, especially if turbulence spreads beyond France.

With presidential elections approaching, the French government appears unwilling or unable to adopt painful fiscal measures for an already bloated budget. Some fear any market flight could cause a cascade effect in other vulnerable bond markets.

The ECB will also lose two other important council members in the coming months. Isabel Schnabel, who heads market operations, will leave on January 3, and chief economist Philip Lane, responsible for monetary policy proposals, will depart on May 31.

ECB analysts do not expect either candidate to fundamentally change monetary policy, at least in the short term.