In light of my previous post...

The ECB is about to experience what happens when supposedly "independent" central banks face negative economic growth prospects.

Having a rule that is jettisoned at the first sign of stress does not set a good precedent for the Euro.


by Monica Houston-Waesch

The departure of two European Central Bank Governing Council members this summer could rebalance of group that has left interest rates unchanged since last June.

Nicholas Garganas, whose term expires June 14, announced on Friday that he won't seek reappointment as head of the Greek central bank. Austrian Klaus Liebscher previously has said he will leave when his term ends Aug. 31.

Their departures follow increased pressure political pressure from both France and Italy this year for the ECB focus less on inflation and more on growth, jobs, and foreign exchange rates.

The ECB's key mandate is price stability, which it says is the best contribution to sustainable growth and employment. Central to the policy debate today is whether rates still need to remain at high levels even as the economy slows, reducing inflation pressures.

Liebscher, a long-term anti-inflation crusader who has been with the ECB since its inception, looks likely to be replaced by Austrian Social Democratic politician and academic Ewald Nowotny, who had until recently been the head of the previously trade union-owned bank Bawag PSK. "It would appear that Mr. Nowotny, were he to be appointed governor, would represent a significant shift towards a less-hawkish perspective than the positions adopted by Mr. Liebscher," Julian Callow, chief European economist at Barclays Capital Research, said in a note to clients.