Luis de Guindos: the 'falcon' of the south shows its claws

Rarely does Luis de Guindos manage to surprise the constellation of bankers, analysts and investors that populate Frankfurt. It wasn’t like that six weeks ago. More than one had to look up from his mobile and reread the headline of the interview that the Spaniard gave to Bloomberg: “Guindos predicts that QE [compras de deuda] ends in July, paving the way for a rate hike.” Barely seven days had passed since Eurobank chief Christine Lagarde announced that net debt purchases would end in the third quarter. Without further specification, scrupulously respecting the agreement reached in the Governing Council, she decided not to specify the end date of the program yet. “The third quarter is three months old,” Lagarde told reporters. But Guindos broke the calculated ambiguity of the Frenchwoman, who was on a trip to Washington that day. His words left little room for equivocation: hawks they had lost their patience and showed their claws.

The Spaniard crosses this month the equator of his eight-year term as number two of the ECB. He agreed to the position being already a regular face in Europe. He had been in charge of Spanish finances when the banking rescue took place and harsh cuts were carried out to calm the markets. In Brussels he is still remembered today as a tax Hawk, faithful to the theses and movements of Berlin. in his book Spain threatenedsour cherries admits his “political affinity” with former minister Wolfgang Schäuble, relentless with the recipe for an overdose of austerity to which southern Europe was subjected. But Guindos was not the preferred candidate in Brussels or Frankfurt, where there were doubts about his independence from political power as he presented himself as a minister of Mariano Rajoy, and as a financier, having been the man for Lehman Brothers in Spain. The lack of Spaniards in key community positions weighed. And Guindos passed in front of the Irishman Philip Lane.

The career at the ECB of this passionate tennis player so far can be summed up in three sets. First sleeve: it’s the number two of Mario Draghi, the man who saved the euro. Their relationship, several sources say, was not exactly outstanding. Guindos defines him as a “traditional central banker, with a lot of personality, who worked with majorities before the Governing Council.” Second set: the pandemic, already as vice president of Christine Lagarde, whose mandate the Spaniard believes is “more inclusive, with open meetings and debates that seek consensus.” The French one dove, has in common with Guindos her past as Finance Minister of her country for a conservative government. “She has been very in profile, without a relevant or high presence,” says José Carlos Díez, professor at the University of Alcalá.

Four years in Frankfurt have not been enough for Guindos to get rid of the sanbenito of politician. This newspaper has spoken with twenty people linked to this universe, including bankers, ex-bankers, senior community officials, analysts and observers. And everyone agrees that the profile of this 62-year-old from Madrid, haughty but courteous, has nothing to do with that of a central banker. “He is a politician. He can’t deny it. He shows up in meetings. He knows how to smell the environment and immediately recognizes the climate on each side. He knows what the direction of the discussion is. And he knows what to say, ”says one of his colleagues. “Without a doubt, he has more freedom than the president. And he knows how to use it, ”says another. Guindos has also had no qualms about speaking to this newspaper. “In 99.9% of the cases I support the president’s vision,” he maintains.

Guindos, chatting at a Eurogroup session with the then former German Finance Minister Wolfgang Schäuble.
Guindos, chatting at a Eurogroup session with the then former German Finance Minister Wolfgang Schäuble.EFE

The markets remain unconvinced of the virtues of former politicians, who are increasingly present in the institution. The doubles pair Lagarde-Guindos imposes less than the tandem formed by Draghi and Vitor Constancio. “Markets perceived them as more credible,” says Frederik Ducrozet, Global Head of Macroeconomics at Pictet WM and an ECB observer. “It is not true that central banking is primarily a job political, even in the broadest sense of the word, even if it involves decisions policies”, says Alessandro Merli, member of the Johns Hopkins University SAIS Europe. “I think it is a consequence of his background [políticos] that the vice president’s public pronouncements on monetary policy are relatively rare and seem less relevant than those of other members of the executive committee, “he adds. Ducrozet agrees: “He has never had a novel idea or initiatives during the pandemic. Probably, he may be more of a financial stability specialist.”

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“From my position I can contribute to the Spanish economy”

That low profile of the Spanish was the reason for the surprise of his interview. “It is true that with his intervention he sent, for the first time in a long time, a signal to the other members of the ECB,” admits Ducrozet. Bloomberg has drawn the ideological spectrum of Frankfurt: on the left, the pigeons, led by the Italian Fabio Panetta. On the right, the hawks, a group that is still in full reconfiguration after the departure of the former president of the Bundesbank, Jens Weidmann, but where the also German Isabel Schnabel begins to discover herself. In that table, Guindos is on the center-right wing, although his colleagues do not doubt that she is in the hard sector. In an era dominated by pigeons, the Spanish would go behind on the scoreboard: two sets to nil. If it weren’t for his adaptability. “It can be considered somewhat aggressive, but it is pragmatic”, considers Drucrozet. And the third set of his career in Brussels starts with a direct serve. “You have to recognize something: he was the first to warn, and very soon, that inflation was going to return sooner or later,” they recognize him from the conservative ranks.

It is not very often that the South sends such a harsh profile to Brussels or Frankfurt given its position: high debts and deficits and the ghost of risk premiums in countries that still suffer from high unemployment rates. In his book, Guindos recalls the time when, under the Aznar government, Spain opposed Germany and France failing to comply with the deficit. But a decade later it was he who dodged in extremis a community fine for violating fiscal rules. “Italy has a strategy as a country and places well prepared profiles that will defend its interests. We Spaniards do not, we have complexes and we try to appear that we are not Spanish”, says José Carlos Díez.

Guindos has already got used to life in Frankfurt. Despite the fact that everything is closed on Sundays, it is a city of affordable dimensions and well connected. He says that he tries to minimize his actions in Madrid, but he is seen more and more in Spain. His agenda testifies to this: outside of his obligations in the city that hosts the ECB and in Brussels, most of the forums he attends are in Spain. In recent interviews he has also addressed the link between pensions and the CPI to Spanish finances. In political circles, this greater intervention in Spanish public life is seen as a possible return, in the event that Alberto Núñez Feijóo wins the next elections. “From my position in Frankfurt, and through the policies of the ECB, I can contribute positively to the Spanish economy, which is an important part of the euro zone”, answers Guindos. Others believe that he has nothing to do with new aspirations. “A new stage opens. And it’s getting harder,” they say. The falcon opens its wings.

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