Bundesbank chief Axel Weber will meet German Chancellor Angela Merkel on Friday to discuss his future after the leaked disclosure of his withdrawal from the ECB presidency race hit markets and put her under fire.
Weber kept markets guessing on Thursday by insisting at a public appearance in Vienna that he would not comment in public on his professional future until he had met Merkel.
The news that he would not seek to succeed Jean-Claude Trichet at the helm of the European Central Bank fed unease in financial markets about divided European policymakers' ability to agree a convincing solution to the euro zone debt crisis.
Merkel is expected to urge Weber to resign quickly to clear the way for a successor, the Financial Times said in an early copy of its Friday edition, citing unnamed sources.
Policymakers themselves were shocked at Weber's withdrawal, first reported by Reuters on Wednesday.
"What a surprise. Truly. I'm dumbfounded," French Economy Minister Christine Lagarde said when asked for her reaction.
Weber, a hardline inflation fighter who heads Germany's central bank, had been seen as the leading contender to replace Trichet until he threw in the towel this week.
His withdrawal dealt a blow to Merkel's drive to secure the ECB presidency for a German and left Italy's Mario Draghi as the main contender in a thin field of undeclared candidates.
It also raised pressure on the chancellor to impose tough German-style fiscal rules on Berlin's euro zone partners to satisfy her coalition and voters at home. The setback came ahead of two crucial summits — on March 11 and March 24-25 — at which European leaders want to agree a comprehensive package to resolve the debt crisis.
It robbed Merkel of a bargaining chip with European partners and she now faces greater domestic pressure to ensure Germany secures its points in the package, which will shape the future of Europe's 12-year old single currency zone.
The ECB has played a crucial role in responding to the crisis, buying the bonds of debt-stricken peripheral euro zone countries as part of a concerted push to try to calm markets.
Weber publicly criticised that decision last May in a breach of collegial discipline that insiders say may have cost him the top job.
The Frankfurt-based central bank stepped in again for the first time in two weeks to buy Portuguese bonds on Thursday, traders said, after yields on the country's debt hit euro-era highs on a perceived lack of progress towards resolving the year-long debt crisis.
Trichet, whose eight-year term at the central bank's helm expires in October, who has steered the ECB with a steady hand during the debt crisis and uncertainty about his successor creates a problem for policymakers.
WEBER SHUNNED?
A German source told Reuters on Wednesday that Weber had decided to rule himself out for the ECB post after he was informed by the German government that his candidacy did not have the necessary support elsewhere in Europe.
Leaders from the 17-nation euro zone are expected to approve a successor to Trichet by the summer and will take their lead from Merkel and French President Nicolas Sarkozy.
A French official source said Merkel and Sarkozy had not yet discussed the ECB succession issue, adding that Paris considered the qualities of a successor to Trichet more important than the nationality.
In Germany, two sources familiar with the plans said Merkel and Weber would meet on Friday and a third said Finance Minister Wolfgang Schaeuble would join them.
The Bundesbank chief will not take part in a Franco-German finance meeting on Friday, a Finance Ministry spokesman said. The Handelsblatt business daily reported that Schaeuble had refused to share a platform with Weber, in a sign of official fury at the central banker.
The Bundesbank said in a statement Weber would be represented at the post-meeting news conference by Andreas Dombret — another board member at the German central bank.
Weber's staunch public opposition last year to the ECB's decision to buy the bonds of weak euro zone members annoyed countries like France and may have doomed his chances for Europe's top monetary policy job.
Berlin has repeatedly denied that the decision on the ECB presidency post would be part of a "grand bargain" that also included the policy package, which is expected to be finalised at the late March EU summit.
But deals on top posts have often been sealed in the EU as part of broader agreements on other contentious issues.
Italy's foreign minister said on Thursday that Rome would make "every necessary effort" to support the candidacy of Draghi, who is governor of the Bank of Italy and a member of the ECB's governing council like Weber.
Other possibles include Luxembourg's Yves Merch, the longest-serving member on the ECB Governing Council, and Finnish central Bank chief Erkki Liikanen, a monetary policy moderate.
