European Central Bank President Mario Draghi will convene the ECB's first meeting of 2012 on Thursday, and lead a debate on monetary policy and the euro zone's debt crisis with a group of colleagues young enough to be his sons.
Following a series of retirements and two unexpected resignations in 2011, the ECB's governing council has undergone the first major generational shift since its 1998 founding.
But it isn't just an age gap that sets Mr. Draghi's ECB apart. The influx of youthful central bankers from Europe's core of Germany, the Netherlands and France—all in their early to mid-40s—brings résumés packed with political experience. They are less grounded in economic orthodoxy than the post-World War II-generation officials they replaced.
"We're getting a new guard," says Guntram Wolff, deputy director of Brussels-based think tank Bruegel. "They are younger, closer to politics and less dogmatic than before."
The generational shift, ECB watchers say, portends a more pragmatic ECB under Mr. Draghi when it comes to safeguarding the stability of financial markets, communicating with investors and increasingly frequent negotiations with governments.
That could mean more bank-support measures if needed, rate cuts to once-unheard-of lows and more awareness of what central bankers can realistically expect from political leaders as they confront the escalating European debt crisis, analysts say.
Mr. Draghi, 64 years old, has brought considerable change after just over two months on the job. He reversed a pair of rate increases made last spring and summer with back-to-back reductions in his first two ECB meetings as president, bringing the benchmark interest rate back to a record low 1%.
The second cut, in December, overruled the recommendation of then-chief economist Jürgen Stark to keep rates steady, according to people familiar with the matter. Last month the ECB pumped nearly €500 billion ($639 billion) into European banks with three-year loans, its longest commitment of funds to date.
Officials are expected to pause on interest rates and other measures when they meet Thursday. Annual inflation remains well above the ECB's 2% target at 2.8%, and recent economic reports suggest any recession in the euro zone will be mild. Still, many economists expect Mr. Draghi to break another taboo in coming months by cutting rates below 1%, a level his predecessor Jean-Claude Trichet never breached, if inflation slows and the economy worsens further.
Other changes have been subtler, focused on the central bank's internal workings. Mr. Stark was succeeded as ECB economics head by Belgian Peter Praet, snapping a monopoly Germany had held on the coveted post since the ECB's creation. The ascendance of Mr. Draghi, who used to head Italy's central bank, put the ECB's top two posts in the hands of Southern Europeans—Portugal's Vítor Constâncio is vice president—shaking up a longstanding north-south balance.
Mr. Stark had pressed for bolder changes before quitting, including the creation of a smaller committee within the ECB that would meet every three months to set interest rates. Such steps require revisions to the ECB's founding treaty, and probably wouldn't gain broad political backing.
But it is the changing of the guard, starting with Mr. Draghi and extending to his new colleagues, that may mark the biggest shift at the 13-year-old central bank.
Jens Weidmann, 43, took the reins at the Bundesbank, Germany's central bank, in May. Before that he was an economic adviser to Chancellor Angela Merkel. He succeeded Axel Weber, 54, who spent most of his pre-Bundesbank career in academia and was widely known in policy circles for rigid anti-inflation views.
Germany's former Deputy Finance Minister Jörg Asmussen, 45, this month followed the 63-year-old Mr. Stark on the ECB's executive board, which runs the central bank's day-to-day operations. Mr. Stark and Mr. Weber resigned last year in opposition to the ECB's purchases of Greek, Italian and other government bonds.
Former Dutch finance official Klaas Knot, 44, succeeded that country's longtime central bank president Nout Wellink, 68, in June. Former French treasury official Benoît Coeuré, 42, succeeded Lorenzo Bini Smaghi, 55, an Italian, at the executive board on Jan. 1.
The new officials "have not been molded in this ECB intellectual framework," that focused exclusively on keeping inflation stable, "so maybe they're a little willing to think outside the box," said Paul De Grauwe, an economics professor at Belgium's Catholic University of Leuven.
The Bundesbank head is widely seen as the standard-bearer for the ECB's conservative, politically independent origins. The Dutch central bank is traditionally Germany's most public ally on monetary affairs.
Though Mr. Asmussen didn't get the economics portfolio, he scored a beefed-up post as head of the ECB's international division, giving him a central role in crisis talks. Mr. Coeuré will serve as the ECB's point person with financial markets.
A better ear for politics could help the central bank avoid the U-turns that damaged Mr. Trichet's credibility, particularly in the early months of the crisis two years ago. The ECB reversed positions on collateral rules for its loans, bond purchases and, more recently, accepting Greek bonds in the event of default. Each time the central bank took a firm stance, only to bow later to the reality that it was the only institution that could prevent wider contagion from sweeping markets.
The new officials "are less emotional, more dispassionate" when it comes to the euro "and are intelligent enough to know not to get drawn into battles that are not their own," said David Marsh, co-head of London-based financial think tank OMFIF and author of a 2009 book on the euro's origins.
"They've got a job to do the best they can, and then when the appropriate time or opportunity arises, they'll move on," he said.
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