Economy

Irish success in next ECB race could scupper Philip Lane’s chances

Sharon Donnery’s success would almost certainly torpedo her boss’s ECB ambitions

Central Bank governor Philip Lane has been widely considered the leading name to succeed ECB chief economist Peter Praet when he steps down early next year. Photograph Nick Bradshaw

Tue Aug 28 2018 - 16:15

Minister for Finance Paschal Donohoe was certain his calculation to pull his man from the race for the vice-presidency of the European Central Bank (ECB) earlier this year would pay off. He can no longer be so sure.

While Central Bank governor Philip Lane emerged as the preferred candidate in February among the European Parliament economic and monetary affairs committee after it grilled the two candidates vying to become ECB president Mario Draghi's right-hand man, his rival, then Spanish economy minister Luis de Guindos, had the necessary political backing.

Rather than put the matter to a vote among fellow European Union finance ministers, Donohoe withdrew Lane in the belief it would give him enough political capital to secure Ireland’s first ECB executive board position next year.

Lane has been widely considered the leading name to succeed ECB chief economist Peter Praet when he steps down early next year. And the Financial Times even identified him on Monday as a possible Draghi successor, as Berlin seems to be cooling on putting its weight behind German Jen Weidmann.

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Problem is: one of Lane's deputies, Sharon Donnery, put her name forward on Friday for the upcoming position as chair of the ECB's banking supervision arm, the Single Supervisory Mechanism (SSM). There's a very strong chance that she will get it. This would almost certainly torpedo her boss's ambitions as it's highly unlikely a small country such as Ireland could hold two senior ECB executive positions in Frankfurt at the same time.

Donnery, who joined the Central Bank 22 years ago, has enjoyed a meteoric rise since she was plucked from overseeing credit unions in 2014 to head up banking supervision, before being appointed deputy governor in 2016. Insiders say she’s an impressive leader and communicator, with the SSM putting her in charge of tackling non-performing loans across the euro zone in late 2015 only adding to her bona fides.

To boot, the ECB is known to be keen to appoint a woman to the job to help address a wider gender imbalance at the top of the organisation.

With it emerging on Monday that a key would-be rival, Bank of Portugal's vice-governor Elisa Ferreira, didn't even put her name in the ring for the job, could the stars are lining up a certain way?

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