Schnabel Exits ECB After Years of Effort to Reconcile German Monetary Views

Isabel Schnabel's decision to leave the European Central Bank (ECB) has closed a seven-year effort to reconcile Germany's monetary conservatism with the institution it hosts and helped create. Her departure comes as the ECB prepares to tackle inflation driven by a fresh energy shock, which could be exacerbated by the recent surge in prices following Russia's invasion of Ukraine.

Schnabel shared a long-held German aversion to high inflation but unlike predecessors Jürgen Stark and Sabine Lautenschläger, she became a leading advocate of crisis-fighting tools. She argued that interventions in sovereign bond markets were essential to prevent financial fragmentation and ultimately protect the single currency.

The remarks, which paved the way for the ECB to announce a new bond-buying programme, echoed former ECB President Mario Draghi's pledge to do 'whatever it takes' to preserve the euro. Schnabel's tenure was defined by an effort to bring Germany closer to the institution's eurocentric thinking.

However, not everyone believes that shift has benefited Germany. Robin Brooks, a senior fellow at the Brookings Institution, argues that Berlin appointed 'the wrong Germans' to the ECB in Schnabel and Nagel, whose support for bond purchases gave ammunition to the eurosceptic Alternative for Germany (AfD) party.

The AfD, which won the largest share of the vote in two German states this month, has been flirting with the idea of leaving the euro. Most mainstream economists, however, credit Schnabel with helping repair Germany's often difficult relationship with the ECB after years of tensions over monetary policy.