IMF's Christine Lagarde nominated for European Central Bank chief

IMF's Christine Lagarde nominated for European Central Bank chief

Christine Lagarde, the managing director and chair of the International Monetary Fund (IMF) and former French finance minister, has been nominated by the European Council to replace Mario Draghi as president of the European Central Bank (ECB).

Lagarde, whose background is in politics, and is not an economist per se, was jostling with a number of nominees for senior EU roles in a meeting of the bloc's executives yesterday. In the same session, Ursula von der Leyen, of Germany, was nominated as the bloc's preferred candidate for president of the European Commission.

The president of the European Council, Donald Tusk, described Lagarde as the "perfect candidate." He praised her "international background and standing as current managing director of the International Monetary Fund."

Tusk added he is "very happy" with the appointment of women to top roles. "After all, Europe is a woman"

Voices from the financial services industry struck a more sceptical tone, however.

Oliver Blackbourn, portfolio manager on the UK-based multi-asset team at Janus Henderson Investors, said: "Hopefully Lagarde's experience at the International Monetary Fund (IMF) will serve her well. However, there are concerns that the move out of this more structured, academic institution into the politically-fraught and ideologically-stretched ECB might be a difficult one, even for such a distinguished figure.

The ECB presidency is perhaps the most difficult central banking job in the world.  Europe remains an unfinished monetary and political union, with deep divides between regional blocs."

Nigel Green, CEO of DeVere Group, described the nomination as "suprising", explining: "it is surprising because she herself has previously appeared to rule herself out from the job. Also, because she is not an economist, she's a political figure with no direct experience of central banking.

"It's controversial due to her ‘baggage.'  Under her leadership the IMF's conduct "raised issues of accountability and transparency," according to a report. She was also found guilty of negligence by a French court over her handling of a case during her time as the French finance minister."

Green concluded, however, "Despite some scepticism, I believe Christine Lagarde's appointment would be well-received by financial markets."

Ben Lord, fixed interest manager at M&G Investments, was more optimistic, arguing Lagarde's appointment makes it more likely the central bank will loosen monetary policy this year. 

"The nomination of a more hawkish president would have posed a significant risk to the market but Lagarde is probably more dovish than the departing president himself: an advocate of QE, of fiscal policy being used to aid monetary, and in the past of more European integration," Lord said. "She may even have a go at persuading Germany to change tack on its current account surplus."

Lagarde, who as France's finance minister was the first female to hold such a post in the G8, has been described as the "rockstar" of finance. 

Tusk added he is "very happy" with the appointment of women to top roles. "After all, Europe is a woman," he said.


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Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.