For Osborne, grappling with the replacement of Sir Mervyn King, read the FA in 2000 deciding who should follow Kevin Keegan
It's a familiar story. Years, if not decades, of underachievement. A string of catastrophic performances. A lack of enthusiasm for any of the homegrown candidates. For George Osborne, grappling with the replacement of Sir Mervyn King as governor of the Bank of England, read the Football Association in 2000 deciding who should follow Kevin Keegan as manager of the England football team. Let's hear it for Mark Carney, the Treasury's Sven-Göran Eriksson, named on Monday as the first non-Brit to run Threadneedle Street in its 318-year history.
From the start of the process to recruit a new governor, Osborne identified Carney as the man for the job and refused to take no for an answer when the governor of the Bank of Canada rebuffed initial advances. The chancellor asked Carney to reconsider, believing that he was a better choice than any of the homegrown candidates. These include Paul Tucker, one of King's two deputies, and Lord Adair Turner, chairman of the Financial Services Authority. Tucker was as big a favourite with the bookies as Harry Redknapp was when Roy Hodgson got the nod from the FA earlier this year.
No question, Carney is a brave and interesting choice. The assumption had been that Osborne, given all his other problems, would opt for the safe pair of hands and choose Tucker, the candidate the City would have chosen.
Osborne wanted Carney for three reasons. Firstly, he has experience of running a big organisation, and this will be important now that the role of the Bank has been expanded to include oversight of the City. Under Labour, Threadneedle Street was really just a monetary policy organisation, where nine technocrats set interest rates in order to meet the government's inflation target. It is now also in charge of macro-prudential policy, which means ensuring that the commercial banks are no longer able to blow up the economy.
Secondly, Carney comes from a country that has a good track record for both monetary policy and financial stability. Canada, like all other major industrial nations, went into recession in 2009, but its downturn was shallower than any G7 country and its recovery stronger than all bar Germany. Inflation in Canada is below target, a contrast with the UK where the annual increase in the cost of living has been above 2% for 69 of the past 78 months.
What also impressed Osborne was that Canada's banks weathered the global storm in 2008-09. There were no failures and no expensive taxpayer bailouts, a contrast to the UK, the US and the eurozone. Carney is seen as the man who can push through changes to financial regulation deemed necessary to prevent a future crisis.
Finally, Carney, 47, is seen as a prize catch. He was chosen by fellow central bankers to chair the Financial Stability Board, created by the G20 group of developed and developing nations after the crisis in an attempt to beef up global banking supervision and regulation. The Goldman Sachs alumnus is as highly regarded by his peers as Gordon Brown was by finance ministers in the 2000s, when the former chancellor was picked to chair the key policy committee at the International Monetary Fund.
Although he doesn't take up his new job until 1 July next year, Carney will have a full in-tray. Britain's economy is still 3% smaller than it was when the recession began in 2008 and King warned earlier this month that output may fall again in the fourth quarter of this year. A further decline in GDP in the first three months of 2013 would constitute an unprecedented triple-dip recession, something few would rule out given the combination of weak consumer demand, a dysfunctional banking system and the ingrained problems of the eurozone. Unless something dramatic happens in the next seven months, Carney will inherit an emergency setting for monetary policy: interest rates of 0.5% and at least £375bn of quantitative easing.
In Canada, Carney is seen as bit of a hawk, but it may be some time before he deems the UK economy strong enough to start returning monetary policy to normal. At the same time, he will also have to decide how to deal with a banking system much different in scale and complexity from its Canadian counterpart. Canada learned lessons from a banking crash in the early 1990s and in the run-up to the crisis of 2007-09 its banks were forced to hold more capital than those in the US, the UK or the eurozone, were less heavily leveraged and were less dependent on finance from the wholesale money markets. Osborne would like some of that conservative approach imported into the UK, while at the same time ensuring that the banks are not so hidebound by new capital requirements that credit is choked off.
Managing Threadneedle Street will be no easy task. Carney has no hands-on experience of supervising banks, which in Canada is the job of a separate institution, the Office of the Superintendent of Financial Institutions. Nor has the Bank of Canada undertaken any electronic money creation on his watch, for the simple reason that quantitative easing has not been needed to revive an economy that has benefited from strong global demand for its natural resources. Signs of a housing bubble are emerging in Canada, and there are those who say Carney is getting out just in time.
The new governor arrives with an impressive-looking CV and may take the helm just at the moment when the economy finally starts to emerge from its torpor. But Britain is not Canada. It is a bigger economy, with a woeful recent track record. While the dreams are of past glories, the reality is slow growth and austerity stretching out for years to come. Carney should not be expected to remedy the deep-seated problems of the economy in five years, but if he fails to deliver results he will find that the unanimous approval with which his appointment was greeted on Monday will be rapidly followed by derision. Just ask Sven.