(Oct 3): German Chancellor Friedrich Merz is set to meet both of the frontrunners to succeed European Central Bank President Christine Lagarde, people familiar with the matter said. 

Spaniard Pablo Hernandez de Cos and Dutchman Klaas Knot will each convene with the German leader to discuss their candidacies for the top job, said the people, asking not to be identified revealing private deliberations. Knot’s meeting will take place in the coming days, while de Cos’ is expected in the next few weeks, they added.

Merz’s engagements with the contenders for Lagarde’s position are the clearest evidence yet of behind-the-scenes movement in the race to lead the ECB, following a strong hint from her of a possible early exit, and the resignation of German policymaker Isabel Schnabel. 

With chief economist Philip Lane’s term also set to end in May, Greece’s premier last week predicted leaders would make “a grand bargain” to choose people for the three impending vacancies all at once. 

Schnabel’s position will be free in early January, and the ECB has already asked governments to find a successor. Discussions on the matter could begin as soon as next week when eurozone finance ministers meet. 

The position of Germany, Europe’s biggest economy, is widely seen as crucial in any deal. The other key player is French President Emmanuel Macron, whose country faces heightened scrutiny in bond markets at present as his government struggles to pass a budget. 

France’s head of state has yet to meet the two candidates but Finance Minister Roland Lescure, the chief of Macron’s office, and his European Union adviser have all done so in recent months, according to a person familiar with the matter. 

A German official, the French finance ministry and Knot declined to comment. De Cos wasn’t immediately available for comment. 

Schnabel’s resignation announcement injected impetus into the selection process. Meanwhile Lagarde this week said she won’t rule out exiting “a few months” before the end of her term in October 2027, implicitly reminding leaders of the need to find a successor.

The flare-up of bond turmoil this week, if enduring, could provide another incentive to settle the matter quickly. Possible elections in Spain before the end of the year after a parliamentary defeat for Prime Minister Pedro Sanchez might become a further reason to act soon.  

Both Sanchez and his Dutch counterpart last week endorsed their own national candidates. De Cos is a former governor of the Bank of Spain and is currently general manager at the Bank for International Settlements. Knot is a former Dutch central bank chief.

Merz’s impending meetings signal that Berlin is no longer considering the possibility of nominating Bundesbank President Joachim Nagel for the top ECB job, the people said. 

For Germany, one alternative to the presidency would be Lane’s position as chief economist, though Schnabel’s markets portfolio also is an option. 

Potential German candidates include professors Markus Brunnermeier of Princeton University and Ulrike Malmendier of Berkeley University, and Tobias Adrian, who just exited the job Schnabel will take at the International Monetary Fund. Former finance minister Joerg Kukies could also be a potential nominee.

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