Central banks wield enormous influence over the world economy, and we're in a year in which we are seeing big personnel turnover at two of the biggest. The new governor of the Bank of Japan has just been appointed, while Wim Duisenberg (Gretta's husband)is due to retire later this year. Well, he was due to retire in July, but that now appears to have been postponed. This is no way to run a central bank. The ECB has enough problems as it's trying to deal with diverging economies under its care without having to worry about the farcical nature of the succession.

When the ECB was founded, the French wanted the top job as a consolation prize for allowing the ECB to be based in Frankfurt. Of course, the French only act in the best interests of the European Union as a whole, that great organization that is making the nation state and national allegiances obsolete. In the French view of the world, the best interests of the EU coincide with surprising frequency with the narrow national interests of France. Funny, that.

In any case, the French wanted their man at the top of the ECB, but in the horse-trading that followed a compromise was struck. The smaller countries got their man in (in this case, Wim Duisenberg, who became quickly known as Dim Wim), but he agreed informally to step down halfway through his tenure. So he duly announced last year that he would be stepping down in July of 2003. There is a hitch though: the successor-designate, the Frenchman Jean-Claude Trichet, is in a bit of a pickle. In fact, he's being investigated and tried on charges of corruption stemming from his tenure as finance minister in the early 1990's. A corrupt French government minister? I'm shocked, shocked!

While the trial continues he can't really be appointed as the head of the ECB, so now Dim Wim has been asked to stay on a bit longer, so the French can clear their man of the charges and put in charge of the ECB later this year. As I said before, this is no way to run a central bank. In an era of fiat money, a central bank's credibility is its greatest asset. The ECB has struggled since its inception to gain credibility as an inflation-fighting central bank in the mould of the old Bundesbank, but by doing so it actually undermined that same credibility. It's been fighting the last war, while the Federal Reserve was trying to stave off deflation in the wake of the internet equity bubble. The Bank of Japan has dug in in the poppy fields of financial Flanders, sending wave after wave of monetary cannon fodder into the mud.

But the ECB's job is not easy to say the least. The structural economic problems that afflict Europe are severe, and much of the blame for Europe's poor economic performance can thus justly be laid at the feet of Europe's politicians. However the entire project of monetary union was always politically driven, without paying too much regard to economic fundamentals. The 12 economies of the European Monetary Union are diverging, and in need of different monetary policies. That's not a problem the ECB can solve, no matter who's in charge.