Macroscope | Markets unprepared for a Europe without Draghi and Merkel

The countdown has begun. On Monday, Luis de Guindos, Spain’s finance minister, was appointed vice-president of the European Central Bank as part of a sweeping shake-up of the six-member executive board of Europe’s monetary guardian, which will culminate in October 2019 when Mario Draghi, the ECB’s president, steps down.

On the same day, German chancellor Angela Merkel, who is struggling to secure approval for a new coalition government after suffering a sharp fall in support in last September’s parliamentary election, appointed a close political ally to the post of secretary general of her Christian Democrat party as she starts to plan her succession.

While financial markets have become increasingly bullish on the outlook for Europe, cheered by strong and broad-based growth and the victory of the pro-European Emmanuel Macron in France’s high-stakes presidential election last year, international investors have a blind spot: the looming departure from the international stage of the two dominant figures in European politics and finance.

It is difficult to overstate the influence Merkel and Draghi have exerted over the 19-member euro zone since the bloc was engulfed in a sovereign debt crisis in 2011 which nearly tore Europe’s monetary union apart.

Draghi single-handedly put an end to the panic in euro zone government debt markets by pledging in July 2012 to “do whatever it takes” to preserve the integrity of the single currency area.