Spanish Prime Minister Pedro Sánchez appointed a close ally as the head of Spain’s central bank, ending the latest chapter in a bitter struggle between the country’s two largest parties over political appointments.

Wednesday’s naming of José Luis Escrivá, currently digital transformation minister in Sanchez’s minority left-wing government, fills an important vacuum in the country’s economic establishment. But the center-right opposition People’s Party (PP) is resisting it, saying this undermines the independence of the central bank.

“Where Sánchez alone has decided, there is a new colonized institution,” PP leader Alberto Nuñez Feijóo said on X. “You cannot go from a ministry to directing the Bank of Spain.”

By contrast, Economy Minister Carlos Cuerpo, an independent, told parliament on Wednesday that “Mr. Escrivá is the ideal candidate for the position ... presenting the best credentials.”

Escrivá, 63, is indeed the first serving minister to take over the governorship since Spain returned to democratic rule in the 1970s.

He more than meets the legal requirements for the job, which only involve being Spanish, and having competence and experience in monetary or banking matters. He was the first head of the European Central Bank’s monetary policy department when it started operations in 1999, and had worked at the Bank of Spain and the European Monetary Institute before that.

“Escrivá would have been seen as a great candidate before he became minister — his credentials are impeccable for the position,” Angel Talavera, chief European economist at Oxford Economics, told POLITICO. “But moving from minister to central bank governor is always contentious.”

Banking crisis

Sánchez’s Socialist Party (PSOE) and the PP had butted heads for months over who should succeed Pablo Hernández de Cos, an internationally respected technocrat whose six-year term expired in June. Typically, the two informally agree that the ruling party should name the governor while the opposition proposes a deputy.

This time around, the PP’s resistance to Escrivá ensured there was no such backroom deal. Contrary to expectations, Cuerpo did not name a new deputy on Wednesday to replace outgoing Margarita Delgado.

Relations between the two parties — never cordial — have soured since collapse of a property boom that led to Spain requiring a €100 bailout in 2012 from the European Union and International Monetary Fund. The banking crisis ruined the careers of many officials and their banking protégés, and led to criminal charges and convictions for some.

Fallout from Catalonia’s attempted secession in 2017 further strained the relationship between the two parties.

Only a couple of months ago, the chance for a deal over the governorship seemed high as the two parties finally agreed to end a five-year impasse over nominations to the Council of the Judiciary, the governing body of Spain’s courts.

That deal — requiring the mediation of European Commissioner Věra Jourová — had appeared to offer the two parties a way back to a more constructive relationship.

Concept of democracy

It’s not the first time Sánchez has been accused of parachuting allies into nongovernmental institutions — a way of shoring up his power that compensates for his lack of a stable majority in parliament.

“For the PSOE, the independence of institutions is a threat to its form of government and its concept of democracy,” Pablo Sáez, economic spokesman for the far-right Vox party, said in response to Cuerpo’s announcement. He pointed to similar appointments at state broadcaster TVE and the attorney general’s office.

“Given the political climate we have in Spain ... it will play into [the opposition’s] rhetoric that Sánchez is populating the public institutions with people loyal to him,” Talavera said.  

The bitterness of the central bank struggle is all the more conspicuous for the fact that Escrivá will not have power to set monetary policy for Spain. The governor is, by virtue of his position, a member of the ECB’s Governing Council that sets policy only for the eurozone as a whole.

However, the bank does play an important role in shaping national debate about the economy, as well as in managing some of the guardrails for the national banking system through what are called “macroprudential” instruments, designed to fine-tune financial conditions at the local level.

Escrivá will attend his first monetary policy meeting in Frankfurt next week, when the ECB is expected to lower borrowing costs for the second time this year.

Carlo Boffa provided additional reporting.