Musical chairs at ECB leaves Germany on guard for doves’ attack

By Simon Kennedy

When the European Central Bank policy makers first convened in June 1998, Bundesbank President Hans Tietmeyer didn’t like what he saw.

The sign in the front of every seat shouldn’t carry the name of each nation’s central bank, but that of the ECB, he said. That would underscore how officials set monetary policy for the whole euro area and not represent their homelands.

From this January there may be a need to highlight who comes from where. That’s because with last week’s acceptance of Lithuania as the currency bloc’s 19th member, a new voting mechanism comes into action.

While President Mario Draghi and his five colleagues on the Frankfurt-based Executive Board will continue to have a vote on policy each time the Governing Council gathers, rules first set in 2003 and revised in 2008 dictate that others will have less of a formal say. At present each national central bank has a vote every month.

The five biggest economies -- Germany, France, Spain, Italy and the Netherlands -- will rotate so each sits out one vote in five. The 14 smaller countries will share 11 votes on a rotating basis. The system will be revised again when the euro’s membership reaches 22.

‘Secure Position’

“This means that the biggest five can consider themselves in a rather secure position, whereas small countries are likely to see their influence decrease over time,” Silvia Merler, an affiliate fellow at Bruegel, a Brussels-based research organization, wrote in a blog last week.

Merler estimates the Executive Board will now enjoy 29 percent of the votes at each session, the five biggest will hold 19 percent versus 20 percent today and the smaller countries will have their share reduced to 52 percent from 56 percent...