Klaas Knot, one of two contenders to become the next president of the European Central Bank (ECB), is open to devising new tools potentially necessary to fight a European debt crisis if he secures the job.
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],” said Knot.
The 59-year-old Dutch man, who led his country’s central bank from 2011 to 2025, was officially nominated on Friday by The Hague to succeed ECB president Christine Lagarde. She will leave the bank 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 the previous ones that led to the creation of the current tools, “I wouldn’t even exclude the fact that we would design another more tailor-made tool,” he said.
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Knot’s main rival is Pablo Hernández de Cos, general manager of the Bank for International Settlements and former Spanish central bank governor, who has been nominated by Madrid.
European leaders might decide on the new ECB president at their next formal summit in late November, but the decision could also be delayed until next month.
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The decision requires the consent of at least 16 of the 21 countries that use the euro, representing 65 per cent of its population.
Leaders will also have to agree on a new ECB chief economist and a new board member in charge of the markets portfolio at the central bank. The term of the current chief economist, Irish man Philip Lane, ends in May and European Central Bank governing council member Isabel Schnabel will leave to join the International Monetary Fund in January.
The ECB’s closely watched leadership reshuffle unfolds against the backdrop of a sharp surge in French government borrowing costs since the summer, with yields on its 10-year bonds briefly shooting above 5 per cent last month. The spread, or gap, to German Bunds widened to 1.75 percentage points before it came down slightly, reflecting the premium investors are demanding to hold French debt.
In reference to an infamous remark by Lagarde in early 2020 that the ECB is “not here to close spreads”, which triggered a temporary bond market sell-off, Knot said the ECB should “definitely be there to contain them [spreads] when driven by unwarranted and disorderly market dynamics”.
The Frankfurt-based institution has created “a toolkit to deal with such situations”, he argued.
These include the emergency bond-buying scheme Outright Monetary Transactions, introduced after former European Central Bank president Mario Draghi’s “whatever it takes” speech in 2012 during the euro zone sovereign debt crisis.
In 2022, the central bank also created the transmission protection instrument as it began raising interest rates to fight surging inflation.
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Knot stressed that any ECB firefighting needed to be done “in a manner that does not undermine its institutional credibility”, adding that the central bank could not fix unsustainable fiscal policy.
Its current crisis-fighting tools “combine a requirement [for governments] to bring fundamentals in order with a temporary shield against unwarranted or disorderly market dynamics”, said Knot, adding that he has “always been a big proponent” of this approach.
He stressed that there was “no magic single spread level” that would trigger an intervention in bond markets from the ECB and that the central bank was right to stay on the sidelines for now.
Moreover, Knot stressed that rising government debt costs in themselves cannot justify European Central Bank bond buying.
“There is a difference between a repricing from one level to another and disorderly market dynamics with a lot of volatility and a lot of contagion across different markets,” he said, adding that the assessment of what constitutes an unwarranted and disorderly market development always involves “a healthy dose of judgment”.
Knot pushed back against public perceptions of him as a monetary policy hawk who has a preference for high interest rates.
“There are situations in which you have to pursue dovish policy, but there are also situations in which you are expected to conduct hawkish policy,” he said, adding that this was “driven by circumstances, not by personalities or predispositions”.
He noted that “dovish policy” was necessary during the Covid pandemic while the ECB had to pursue a “hawkish” one to fight surging inflation from 2022.
Over the coming months, the European Central Bank’s interest rate policy is likely to be hostage to developments in the Middle East and their impact on energy prices, he said. Policymakers in Frankfurt have increased borrowing costs in two quarter-point steps since June to 2.5 per cent.
He said that if energy prices remained roughly where they were, he saw little need for higher interest rates. “There may be a bit of extra tightening needed, but I don’t think an awful lot of it,” Knot said, adding that any interest rate changes needed to be “very measured”.
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During the early days of the Greek sovereign debt crisis in 2011 and 2012, Knot made headlines by becoming one of the first officials to publicly discuss whether the country might default on its debts or might leave the euro, warning it must not happen involuntarily.
He said his intention was not to argue in favour of such drastic steps but to warn about a “disorderly default or an involuntary Greek exit” as both would have had “devastating effects” on financial stability in Greece and the rest of Europe.
In September 2019, Knot caused a stir by issuing a rare public rebuke of a decision by the ECB’s governing council, when Draghi had pushed through a controversial restart of bond buying and a further reduction in negative interest rates.
“My main concern was about proportionality at a time when the side effects [of quantitative easing] were clearly accumulating,” he said, adding that he preferred to make his point in public rather than have it emerge anonymously through media reports.
“The bar for publishing such a statement again today would clearly be higher,” he acknowledged. – Copyright The Financial Times Limited 2026
