There is a changing of the guard at the European Central Bank this year with two important new appointments.
Philip Lane, the governor of the Irish central bank, was appointed chief economist of the ECB back in June. And and the current head of the IMF, Christine Lagarde, was recently nominated to succeed Mario Draghi as president of the ECB in November. By all accounts, she is a shoo-in: she is the ultimate insider, having served as French minister of finance before becoming director of the IMF, and she has cultivated excellent relations with the main players in European politics. She’s a favorite of the French and the Germans, seemingly well-liked by many of the smaller European governments. Even Yanis Varoufakis, the former finance minister of Greece who clashed with her over so-called austerity for Greece, testifies to great admiration for the future president of the ECB.
Since we can expect Ms. Lagarde to be appointed with a minimum of opposition, the question arises: what does this mean for future European monetary policy? The announcement of her appointment was greeted with euphoria on financial markets, as it is believed that the ECB will turn even more dovish under her leadership. There can be little doubt that she will follow in the footsteps of her immediate predecessor and “do whatever it takes” to keep the ECB going and European financial markets — and governments — afloat. Nor is there any doubt that she possesses the skill-set to navigate the institutional and international politics required of her new job, as a recent article in the Wall Street Journal makes clear. This does not answer the key question, however. Even the most mundane technocrat is always guided by an ideology, a worldview or set of ideas that shape how she thinks about what is possible and what is not. What we really need to know is: what ideas will guide Ms. Lagarde when she becomes chief of the ECB in November?
Her own background offers little clue, beyond the fact that she is obviously aligned with the mainstream of European politics. But she is a centrist through and through,