Christine Lagarde will raise the profile of the European Central Bank, making it...
FRANKFURT - Christine Lagarde will raise the profile of the European Central Bank, making it a more politically-savvy institution that takes its message directly to the people. However policy innovation, the trademark of her predecessor, may be relegated.
With little training or experience in monetary policy, Lagarde, who takes over from Mario Draghi on Nov 1, will be the arbiter and not the driver of the policy innovation that is now needed, putting a greater burden on Philip Lane, the ECB’s new chief economist, and the bank’s staff. In his 2012 speech promising to do “whatever it takes” to save the euro - widely credited with holding the bloc together during the darkest days of its debt crisis - Draghi took the initiative himself, forcing an unaware Governing Council to follow and line up behind him.
But Lagarde, the IMF’s Managing Director, may be more of a listener, which could give a greater role to the Governing Council in shaping policy and improve the diversity of views. Obsessed with budget surpluses and paying down debt, Germany has been reluctant to spend more and Draghi’s biggest failure may prove to have been not convincing German Chancellor Angela Merkel to use record low borrowing costs to invest more.
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