WOOD Flash – Europe macro: reflections on the new EU leadership nominations

The EU Council has nominated a French woman to lead the ECB and a German woman (with a very international background) to lead the EU Commission. On balance, the recent announcements, in our view, reveal a slight increase in the balance of power for France, although the most important job went to Germany (but that was to be expected). These appointments reinforce our expectations of policy continuation going forward, with minimal changes to the fiscal strategy, no hugely binding new constraints on the rule of law and, thus, no major penalty on Eastern Europe on the allocation of cohesion funds from 2021E-onwards. However, policy continuity will still coexist with growing tensions within the EU, but these challenges will be most problematic at the time of the next general recession, which is three-to-five years away, in our view.