Bank chief may stay on after legal row over his successor

Europe's most powerful economic job was at the centre of new controversy and confusion yesterday, amid persistent rumours that the president of the European Central Bank (ECB), Wim Duisenberg, will stay on because of uncertainty over his successor.

Five years after the appointment of Mr Duisenberg as the first ECB president provoked a vicious dispute, the succession has been thrown into doubt by legal action against the heir apparent, Jean-Claude Trichet, the governor of the Bank of France.

Yesterday EU leaders postponed the highly sensitive decision on the ECB appointment, leaving the future of the post in a state of acute uncertainty.

In 1998 the French opposed the nomination of Mr Duisenberg for an eight-year term and insisted on a "gentlemen's agreement" under which he would make way for M. Trichet halfway through his period in office.

Ironically France now seems to want Mr Duisenberg to stay on for a short time to help to keep alive M. Trichet's chances of clinching the job. The French banker is hoping to clear his name after being embroiled in a legal inquiry over a financial scandal involving the Crédit Lyonnais bank.

Last year Mr Duisenberg announced that he intended to retire in early July, but hinted he would be prepared to stay longer if necessary.

At yesterday's EU summit Jean-Claude Juncker, Luxembourg's Prime Minister, said the decision on the next ECB president "depends on the outcome of the procedure before court". He added that it would be a "good idea" if Mr Duisenberg could stay as president "under the circumstances we are in".

The timetable for the choice of a successor is now extremely tight. A judge in Paris has promised to deliver a verdict on 18 June in the Crédit Lyonnais trial, in which M. Trichet is charged with complicity in the publication of misleading accounts. That is only two days before EU leaders are scheduled to meet at their next summit in Thessaloniki, Greece, leaving them with little room for manoeuvre if M. Trichet is not completely vindicated.

M. Trichet would need to win unanimous consent from EU government chiefs and pass a confirmation hearing by the European Parliament, which would normally take at least one month to arrange.

Mr Duisenberg has said he wants to "go fishing" on his 68th birthday on 9 July. But with the euro strengthening on foreign exchanges and the ECB showing flexibility in cutting interest rates, Mr Duisenberg's tenure has won more praise recently after a shaky start in which he won the nickname "Dim Wim".

Officials point out that he could be asked to extend his period in office at any juncture without legal problems. That is because he was originally appointed for eight years and is only stepping down as part of an informal agreement.

An ECB spokesman said: "Mr Duisenberg has repeated his offer several times to stay on longer to ensure a smooth transition. Everything else is in the hands of the heads of state and governments."

Other French potential candidates for the job include Christian Noyer, a former Treasury director. M. Noyer served as ECB vice-president for four years until his term finished in May 2002.

The charges against M. Trichet arise from his responsibilities as head of the French Treasury from 1987 to 1993. He denies the charges, but if found guilty he faces a maximum jail sentence of five years and a fine of up to €375,000 (£255,000).

* The former Dutch prime minister Wim Kok was appointed yesterday to head a new Europe-wide task force to help boost job creation in the 15 EU member states. Mr Kok, a former trade unionist who rose to become a Labour Party leader and premier of the Netherlands, will be asked to identify "practical reforms" to help to boost competitiveness and employment.

Mr Kok will examine Europe's labour market and produce a report to go to a summit of EU leaders next spring. The move is part of the "Lisbon process", designed to make the EU the world's most competitive economic bloc by 2010.