Breakingviews - Lagarde lends ECB continuity more than credibility

IMF Managing Director Christine Lagarde holds a news conference at the IMF and World Bank's 2019 Annual Spring Meetings, in Washington, U.S. April 13, 2019. REUTERS/James Lawler Duggan

LONDON (Reuters Breakingviews) - The winner of the European Union’s jobs jackpot will matter less during the next economic downturn than the one who got the consolation prize. After much unedifying horse-trading about who would head the European Commission, the bloc’s leaders on Tuesday agreed a package deal that included naming International Monetary Fund boss Christine Lagarde to replace Mario Draghi as European Central Bank president. The Frenchwoman brings more continuity than credibility to an institution that rescued the euro from an existential crisis.

Tuesday’s agreement also saw leaders choose German Defence Minister Ursula von der Leyen as head of the European Commission and to give the European Council presidency to Charles Michel, currently Belgium’s caretaker prime minister.

Lagarde, a former French finance minister, will stick to the monetary policy course charted by Draghi, who has signalled that the central bank is willing to ease again if needed to revive inflation and growth. She has a good track record of being a consensus-builder and brand ambassador, and has demonstrated an ability to run a large institution whose employees come from many countries.

But while the first woman to chair global law firm Baker McKenzie will be the ECB’s first female chief, she is also the first to have landed the job without central banking experience. Granted, she’s exposed to economics in her current post, which she took up in 2011, and ran France’s finances before then. But neither role required the sort of market savviness and familiarity with the intricacies of the dismal science that’s de rigueur at the ECB.

Lagarde’s lawyerly background means she quickly masters her briefs, as she proved when she was parachuted into the finance ministry by then-French President Nicolas Sarkozy and headed off to a euro zone finance ministers’ meeting shortly afterwards. And she has no obvious prejudices that would get in the way of a thorough review of the ECB’s monetary policy strategy.

But nor is it clear that she brings her own innovative ideas for tackling challenges like sluggish inflation when policy rates are already at record lows. She will rely heavily on ECB Chief Economist Philip Lane for creativity. As the face of the central bank, she will have to prove she’s up to guiding investors with rhetoric. The last French person to hold the top ECB job, Jean-Claude Trichet, is often blamed in hindsight for raising interest rates during the early days of the financial crisis. But at least he arrived with credibility. His fellow-citizen will have to avoid missteps even as she earns her spurs.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at and follow us on Twitter @Breakingviews and at All opinions expressed are those of the authors.