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EU leaders battle it out to fill EU Commission and central bank top jobs

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

The EU’s 28 member countries have elected a new European Parliament, but now it’s down to the politicians to decide who gets the top jobs.

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Key amongst those is the role of president of the European Central Bank (ECB), which will become vacant once Mario Draghi steps down as president in October.

Like him, or not, Mr Draghi is widely credited with saving the single currency. In 2012 he famously declared that the ECB was prepared to do “whatever it takes” to preserve the currency. A move that was seen as a turning point, shoring up confidence in shaky European economies and rebooting lending.

Mr Draghi is likely to be a hard act to follow; not least because it’s a very different political world today than the one he took the role in initially.

But during his eight-year tenure, the Italian economist has been no stranger to controversy and radical policies, especially during the eurozone debt crisis. But today’s political and economic landscape is very different it what it was back in 2011. Then, the eurozone was in financial crisis, but monetary policy still had traction. Short-term interest rates were positive and Mr Draghi’s first action was to cut them.

His successor is likely to adopt one of two stances - become a Draghi ‘mini me’ and continue his approach, or come in as new broom and quickly wrap up the stimulus programmes Draghi instated.

However, policies aren’t the only issue when it comes to picking the new boss. Politics plays a very big part.

Germany, which has never had one of its own in the chair would, of course, love the next President of the ECB to be a German national. But, it’s not that simple - as is so often the case with EU issues.

With French president Emmanuel Macron and German chancellor Angela Merkel already fighting it out to get their European Commission president of choice, whoever wins will probably mean a fellow national won’t stand a chance of getting the ECB role as well.

And choosing the right person for that role is already proving troublesome. Just last night, four hours of talks that got nowhere, ended with an agreement among EU leaders to hold a new summit in 10 days’ time.

It does seem as though last night’s talks all but eliminated the candidates put forward by Europe’s three main political alliances for the Commission role. Negotiations are expected to resume next week in Osaka, Japan when France, Germany, Italy, Spain, the UK and the Netherlands will attend the summit of G20 leaders.

With politics dominating everywhere you look at the moment it can feel like investing in any region comes riddled with problems - both actual and potential. The Eurozone has the Brexit problem hanging over it as a whole, but with the emergence of a newly-dominant centre-right, now the European Commission is proving to be another battle ground. So you can only assume the choice of ECB president will be just as fraught.

In the US, President Trump continues to make waves and as if a trade war with China wasn’t enough, there’s now the added threat of another Gulf war that’s growing more likely every day.

It’s enough to make Brexit and even the Priministerial race in the UK pale into insignificance in comparison. And it’s certainly enough to make investors pause to think about where in the world opportunities, growth - and any sort of stability - lies.

I spoke to Ayesha Akbar, manager of the Fidelity Select 50 Balanced Fund, this week about this very issue and the problems such turmoil generates. She told me how she copes when it comes to running a global portfolio. We discussed everything from trade wars to Brexit and Ayesha explained the stance she takes when it comes to weighing up the risks. She also explained why she sees value emerging close to home, in the UK and also in Europe.

Listen to the interview with Ayesha on the Fidelity Select 50 Balanced Fund here in the latest edition of the MoneyTalk Podcast.

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