German Rep Resigns From ECB Board Amid Policy Disputes

Sabine Lautenschläger, Germany’s representative on the European Central Bank’s executive board, has resigned over the institution’s changes to its monetary policy.

Lautenschläger’s decision to step down is proof that there is a deep division within the institution’s top ranks over its recent decision to loosen monetary policy. It is unknown who will be chosen to replace Lautenschläger, who joined the ECB’s executive board in January 2014 on an eight-year term. She was recently replaced as vice-chair of the supervisory board of the ECB’s Single Supervisory Mechanism, removing the only female member of the ECB’s 25-person governing council.

She was one of the members who opposed the decision to restart the ECB’s bond-buying scheme, with the heads of the German, French, Dutch and Austrian central banks all coming out against the decision.

“President Mario Draghi thanked her for her instrumental role in helping set up and steer Europe-wide banking supervision, a key pillar of banking union, as well as her unwavering commitment to Europe,” the ECB said in a statement, according to The Financial Times.

And Frederik Ducrozet, economist at Pictet Wealth Management, said in a tweet that Lautenschläger’s departure meant there is currently no German on the executive board and no woman on the 25-member governing council.

“Berlin’s choice will be crucial on all levels,” Ducrozet wrote, adding that Isabel Schnabel, professor of financial economics at Bonn University and one of the five members of Germany’s Council of Economic Experts, “would be a perfect fit indeed.” Another potential candidate is Claudia Buch, vice-president of the German central bank.

In a few weeks, International Monetary Fund (IMF) chief Christine Lagarde is set to become the ECB’s next president. Lagarde, a former French finance minister, would be effective in building consensus, said Eswar Prasad, a former IMF economist who is now a professor at Cornell University, back in July. “But whether she can provide the sort of visionary and creative technocratic leadership that Draghi brought to the job remains to be seen.”