Bank scandal forces Duisenberg to stay on

Wim Duisenberg, the president of the European Central Bank, will stay in the EU's most powerful economic job beyond his planned retirement date because of continuing problems in appointing a successor.

After weeks of rumours, Mr Duisenberg said he would remain in post longer than expected, a move that throws a lifeline to the man who expects to take over, the governor of the Bank of France, Jean-Claude Trichet.

Mr Duisenberg had planned to stand down about half-way through his eight-year term on 9 July, his 68th birthday, to make way for M. Trichet as part of a deal struck at the insistence of the French President, Jacques Chirac, in 1998.

But M. Trichet faces charges of complicity over the publication of misleading accounts by the Credit Lyonnais bank a decade ago, and a verdict in the French courts is not expected until 18 June. The French central bank governor could not be appointed with a legal cloud hanging over him and, if the decision on the succession were to be taken on schedule, he would have to bow out. Even if M. Trichet is cleared in June, not enough time would be available to install him by early July.

Ironically, France, which was once so keen to limit Mr Duisenberg's term of office, has been the main force in persuading him to stay on. In 1998, M. Chirac threatened to block Mr Duisenberg's appointment unless he accepted a "gentleman's agreement" under which he would hand over to M. Trichet half-way through his eight-year term.

After being asked by EU finance ministers to remain until his successor is appointed, the ECB president said: "I'm not going to tell anyone how long I'm going to stay. I will be president of the ECB up to and until the day my duly appointed successor takes office."

The decision will be of some satisfaction to Mr Duisenberg, whose lack of a sure touch when he took up the post won him the nickname "dim Wim". But the recovery of the euro on the foreign exchange markets has helped to improve the reputation of the former Dutch central banker.

The fact that Mr Duisenberg has been asked to stay on reflects the continuing desire among finance ministers to see M. Trichet in the top job if at all possible. As head of a large central bank and with a good reputation, in Europe and in the United States, M. Trichet is seen as the ideal person for the position.

If he is not cleared, however, France is likely to put up an alternative candidate. Luxembourg's Prime Minister, Jean-Claude Juncker, who also serves as the country's Finance Minister, said: "I personally do believe that M. Trichet will be the next candidate because I think that the court's decision to be taken in France will allow him to do so. If not, it will have to be a Frenchman."

The EU finance ministers also decided it was too early to assess the economic impact of the war in the Gulf.