A power struggle between Germany, France and Spain is set to leave a seat vacant on the European Central Bank's six-member board in the middle of a potentially devastating crisis for the currency that the bank was created to oversee.
Spain's Jose Manuel Gonzalez-Paramo is due to leave the ECB board, which runs the bank day-to-day and sets the agenda for its policy meetings, when his eight-year term ends on May 31.
He is widely expected to be replaced by Luxembourg central bank chief Yves Mersch, who is now the clear leader in a three-horse race with Spanish ECB lawyer Antonio Sainz de Vicuna and Slovenia's Mitja Gaspari.
The changeover in ECB personnel would usually be seamless. However, the process has stalled as Germany, France and Spain fight over heading the ESM bailout fund and the Eurogroup of finance ministers, the two remaining major euro posts out of four that were up for grabs.
With the political jockeying still in full play and the posts unlikely to be agreed upon in the new few weeks, three euro zone central bank sources say the ECB has accepted that it will have to cope with being one down for a least a month.
The problem comes as the euro zone makes emergency plans in case Greece becomes the first country to leave the euro. For the ECB, a Greek exit would leave it, and euro politicians, scrambling to keep the currency bloc alive.
"I can't see it (the new board member in place) being before July 1," said one source.
POWER STRUGGLE
The ECB Executive Board sets euro zone interest rates and other forms of monetary policy alongside the bank's larger Governing Council made up of the bloc's 17 national central bank heads.
Euro zone leaders and finance ministers, rather than the ECB, decide who sits on the board. Although they can agree in writing at any time on ECB appointees, the next major meeting where a decision is likely is not until June 21.
Despite the crisis, Gonzalez-Paramo has had his responsibilities heavily reduced over the past couple of months and ECB insiders say the board can easily operate with five.
However, the delay in bringing the ECB board up to strength could hardly have come at a more critical time.
France's presidential election was the original cause of the delay in filling the seat: Paris was unwilling to make a decision on the posts until its new leader was in place.
France had also hoped to get fill one of the other top posts in play, either the EBRD president job, which went to Britain's Suma Chakrabarti last week, or the ESM job, for which Spain's Belen Romana Garcia is currently firm favourite.
With Germany's Wolfgang Schaeuble also angling to head meetings of the influential Eurogroup, which makes many of the bloc's most far-reaching decisions, France faces being left empty handed.
While it still has a seat on the ECB's Board, France's role on the international stage has diminished since the departure of Jean-Claude Trichet as ECB president and following Dominique Strass-Kahn's ugly resignation from the IMF.
The replacement of Gonzalez-Paramo holds additional significance because another ECB board seat will not become free until May 31, 2018.
Until now Germany, France, Italy and Spain – as the euro zone's four biggest economies – have always held an ECB board seat. If Mersch, one of the ECB's most experienced and inflation-focused policymakers, does win the current race as expected, it will be the first time that stranglehold has been broken.
