Klaas Knot, one of two contenders to become the next president of the European Central Bank, says he is open to devising new tools if necessary to fight a European debt crisis should he secure the job. Speaking to the Financial Times, Knot said he was ready to use the ECB's existing crisis-fighting tools, including bond buying. "If circumstances so dictate, we won't hesitate" to intervene, he said. The 59-year-old Dutchman, who led the Netherlands' central bank from 2011 to 2025, was officially nominated by The Hague to succeed Christine Lagarde, who will leave the ECB in early February, nine months before the end of her eight-year term.
Knot did not rule out creating additional instruments to combat future crises. If the next crisis is different in nature from previous ones, he said, he would not exclude designing another, more tailor-made tool. His main rival is Pablo Hernández de Cos, general manager of the Bank for International Settlements and former Spanish central bank governor, nominated by Madrid. European leaders may decide on the new president at their late November summit, though the decision could slip to next month. It requires the consent of at least 16 of the 21 euro countries, representing 65 per cent of the bloc's population.
The leadership reshuffle comes amid a sharp rise in French government borrowing costs since the summer, with yields on 10-year bonds briefly topping 5 per cent last month. The spread to German Bunds widened to 1.75 percentage points before easing slightly. Knot said the ECB should "definitely be there to contain them" when driven by unwarranted and disorderly market dynamics, pointing to tools such as Outright Monetary Transactions and the Transmission Protection Instrument. He stressed that any intervention must not undermine the bank's institutional credibility and that the ECB cannot fix unsustainable fiscal policy.
Knot also said there was "no magic single spread level" that would trigger ECB action in bond markets, and that the central bank was right to stay on the sidelines for now. Rising government debt costs alone, he stressed, cannot justify ECB bond buying.
Source: Financial Times Markets · Summarized by HeadlinesBriefing