The French solution: France's legal maneuvering to gain the ECB presidency.

France is turning to its top lawyers to see if it can find a legal way out of a potential economic catastrophe: the lack of a French representative on the European Central Bank's ruling council next year.

The legal option has surfaced because France's political campaign to pressure ECB President Wire Duisenberg to step down in 2002 has apparently failed. (See "France's New Reign of Terror" in the July/August 2001 issue of TIE.) Duisenberg, 66, has given no indication that he plans to resign midway through his eight-year term, which runs through 2006. Come next May, the term of the ECB's Vice President, Frenchman Christian Noyer, runs out, and Paris fears that European Union leaders will want to fill the No. 2 slot with someone from an EMU-member country other than France for a full eight-year term.

When EU heads of state elected Duisenberg in 1998, they gave the French a commitment to fill the next ECB presidency. France's highly qualified candidate at the time was Bank of France Governor Jean-Claude Trichet. But he is now under the cloud of a judicial investigation into whether he covered up the falsification of accounts in the early 1990's, when he served as co-head of French bank supervision.

This explains why French experts are scouring the 1992 Maastricht Treaty, which created the EMU, to see whether it leaves room for Noyer to succeed Duisenberg if--as now seems to be the case--the ECB president remains in the post well into the second half of his term. As many constitutional lawyers read the Maastricht Treaty, neither the ECB vice president nor any other member of the Executive Board can move up to the presidency. The experts argue that members of the Executive Board, after having served their terms, will not be eligible for president.

But Thomas J. Pommera, a French specialist for European Community law, argues that Noyer could qualify under the Treaty as a French candidate to succeed Duisenberg after Noyer leaves the ECB Board. Pommera says Noyer would have a major advantage over two other possible French candidates: Finance Minister Laurent Fabius and former Deputy Finance Minister Jean Lemierre, now President of the European Bank for Reconstruction and Development (EBRD). The fact that Noyer has completed a term as ECB vice president would give him expertise the other two lack in the area of central banking, which the Maastricht Treaty requires as a qualification for the post of ECB president. Noyer's election to the presidency would not be seen as "a prolongation of his term at the Executive Board," which the Treaty precludes, according to Pommera.

Pommera's argument is shared by some senior officials inside the ECB. They say Duisenberg believes Noyer would be a strong candidate to succeed him. But Pommera's interpretation of the Maastricht Treaty is vehemently disputed by other experts, particularly Germans, who have no interest in seeing a Frenchman run the ECB. They insist there is no possibility for the ECB president, vice president or the other four members of the Executive Board to be re-elected. Gert Nicolaysen, a well-known EU-legal expert in Hamburg, says any maneuvering to elect Noyer as head of the ECB would smack of "manipulation." Nicholaysen says Noyer could move up to fill the ECB presidency only if something happened to Duisenberg, and then only until the end of next May, when Noyer's term as vice president ends. "The words of the Treaty's respective paragraphs are very clear," contends Nicholaysen.

This view is backed by Martin Seidel, a law professor at the Bonn Institute for European Law and European Integration. According to Seidel, the Maastricht Treaty treats the terms of the president, the vice president, and the other members of the ECB Executive Board as those of a team of six board members. "There is no renewal possible after one member's term expires," Seidel declares.

Rolf-Guenther Thumann, who was negotiator of the Maastricht Treaty for the German Economic Ministry, warns that a "loose" interpretation of the Treaty might cause further damage to the euro, which has suffered a relentless fall against the U.S. dollar. "A second term for a member of the ECB Executive Board would be seen by the markets as political interference," says Thumann, who now is economic adviser for a group of investment funds based in London.

That's the last thing the ECB needs. It has enough troubles already--from its controversial interest rate policy to the weak ebro. An early departure of Duisenberg under political pressure orchestrated by Paris could be a Waterloo for Euroland. Even Noyer, perhaps France's last best hope to succeed to succeed Duisenberg, laments the damage to the central bank's credibility. "It's very, very upsetting that this debate is developing," he says.

Klaus C. Engelen is the International Correspondent for Handelsblatt in Dusseldorf, Germany.