ECB chief Mario Draghi bows out Monday (28 October), passing the baton to former IMF head Christine Lagarde whose first task will be to heal rifts among policymakers.
The man credited with saving the euro during his eight-year tenure at the European Central Bank will be sent off with speeches by German Chancellor Angela Merkel, French President Emmanuel Macron and Italian head of state Sergio Mattarella.
But before Draghi has even left the bank’s Frankfurt headquarters, attention is switching to Lagarde, a French former economy minister about to become the ECB’s first female president.
While the 63-year-old has ambitions to focus on gender equality, climate action and jargon-free language, analysts say the most pressing issue is to resolve divisions over Draghi’s final monetary stimulus package.
The Italian central banker in September restarted government and corporate bond purchases to the tune of €20 billion per month to bolster a stuttering eurozone economy.
The move sparked fierce public criticism from some of the ECB governing council’s 25 members, who argued it was too heavy-handed and robbed the bank of firepower in case of a more protracted downturn.
Finding a way to bridge the divide and “have the two sides talk to each other” will top Lagarde’s to-do list, said ING bank economist Carsten Brzeski.
“This also means that there won’t be any imminent changes to monetary policy.”
‘Change in style’
Not an economist herself, Lagarde lacks the technical expertise of other members on the council, made up of 19 central banker governors and a six-person executive board.
But she is a savvy, well-connected politician who won plaudits for guiding the International Monetary Fund (IMF) through the aftermath of the financial crisis.
“Lagarde will be more depending on advice from others,” Brzeski told AFP.
“That doesn’t have to be a disadvantage but will definitely be a change in style.”
Lagarde, a lawyer by training, has already signalled that Draghi’s easy-money legacy will be in safe hands.
In a bid to drive up growth and stubbornly low inflation, Draghi guided the ECB council as it set interest rates at historic lows, hoovered up €2.6 trillion in bond buys and offered ultra-cheap loans to banks.
Lagarde told EU lawmakers last month she would stick to the “same sound principles” as the euro area grapples with headwinds from US-led trade tensions, Brexit chaos and slumping German exports.
She is already echoing Draghi’s calls for governments in the 19-nation currency union to use their fiscal leeway to help boost the economy — a plea she regularly made as IMF boss.
“Monetary policy has done a lot in recent years. Finance and economic policy must complement it now,” she told German weekly Der Spiegel on Friday.
Such calls have been mainly aimed at economic powerhouse Germany, and so far fallen on deaf ears.
As the global outlook worsens, observers are hoping that could change under Lagarde who counts Merkel as “a dear friend”.
Used to being the only woman in the room, Lagarde has vowed to tackle the gender gap in the higher echelons of the ECB.
“I would dearly like to see more women in the financial world and to make their voices heard,” she told Spiegel.
Lagarde is expected to soon be joined at the bank by respected German economist Isabel Schnabel, who is going through the nomination process.
If confirmed, they will be the only two women on the bank’s council and board.
Lagarde has also set herself the goal of communicating more clearly, promising she would “bring the ECB and its monetary policy closer to a broad public”.
On climate change too, Lagarde sees room for improvement.
The ECB’s core mandate is “price stability of course… (but) climate change and environmental risks are mission critical,” she said during her grilling by Brussels lawmakers, adding that she backed a “gradual transition” of the bank’s investments to greener projects.
Draghi will on Monday hand over a replica of the chairman’s bell to his successor.
The real thing will be waiting in the governing council’s meeting room on the 41st floor of the gleaming ECB skyscraper.
Lagarde officially takes up the post on 1 November.