FRANKFURT, Germany (AP) — European Central Bank President Christine Lagarde will resign nine months before the end of her term, a decision that paves the way for European leaders to choose a successor before The presidential election in France next year.
Lagarde, 70, will leave on February 7, the ECB announced on Thursday. His eight-year term was set to end on October 31, 2027.
The resignation paves the way for complex political bargaining over his successor and the replacement of two other senior officials who will leave next year. The ECB president heads the bank’s board of governors, which sets interest rate for the 21 countries that use the euro, affecting borrowing costs for everything from home purchases to new factories and serving as a bargaining chip for the European Union chief crisis fighter in times of economic and financial turbulence.
“It has been a great pride and an immense privilege to serve this institution,” Lagarde said in a video message published on X. “I think I leave this institution with the feeling of the good work accomplished and of an ECB ready for the future.”
Asked about her reasons at a news conference following the bank’s decision to leave rates unchanged, she said she wanted to be freed from the obligation of political neutrality that comes with being head of the ECB.
“I want to have freedom of speech, freedom of expression and freedom to engage on issues that are not monetary policy,” she said. “I don’t think I can feel comfortable in that neutrality right now.” She didn’t specify.
The announcement was expected following speculation that Lagarde would leave early to allow European leaders to choose a successor while pro-European French President Emmanuel Macron is still in office. This would avoid the possibility of right-wing candidate Marine Le Pen winning the election and influencing the choice.
“The fact that she is leaving early is not a surprise and does not change the ECB’s political outlook,” said Holger Schmieding, chief economist at Berenberg bank.
European Council President Antonio Costa said the selection process “will be launched today and will continue without delay”.
The term of another senior ECB official, chief economist Philip Lane, is due to end on May 31, while another member of the ECB board, Isabel Schnabel, is resigning on January 3 to join the International Monetary Fund. EU leaders are expected to reach a comprehensive agreement to distribute the three vacancies among member countries in a complex round of political negotiations.
European leaders will likely seek to reach an agreement on the three items before the Dec. 17-18 summit, said Holger Schmieding, chief economist at Berenberg bank.
He said the main candidates for Lagarde’s job appeared to be former Netherlands central bank director Klaas Knot and Spaniard Pablo Hernández de Cos, director general of the Bank for International Settlements. The BIS is an international organization of central banks.
“The European Union is trying to protect itself at least somewhat against the risk that the right-wing Marine Le Pen wins the French presidential election in April-May 2027,” Schmieding wrote in an email. “Lagarde’s successor will always be designated while the resolutely pro-European centrist Emmanuel Macron will always reside at the Elysée.”
Lagarde, the former director of the International Monetary Fund, was appointed in 2011 to succeed Mario Draghi. A key decision during his tenure was made in 2020, when the bank deployed 1.35 trillion euros ($1.5 trillion) in emergency stimulus measures in the form of bond purchases to prevent the COVID-19 pandemic from drying up credit to the economy.
The bank’s ability to act quickly – in contrast to the often drawn-out negotiations between the European Union’s 27 national governments – has given it a leading role in tackling Europe-wide crises such as the pandemic and the peak period of the eurozone debt crisis in 2010-2012. Most notably, Draghi’s promise in 2012 to “do whatever it takes to preserve the euro” calmed the bond market turmoil that raised fears of a breakup of the euro zone.
Lagarde’s announcement overshadowed the bank’s decision on Thursday to leave its benchmark interest rate unchanged at 2.5% despite annual inflation of 3.8% fueled by high oil prices caused by the US-Iran war. High rates are dampening inflation, which is above the bank’s 2% target. However, rising bond market rates are already tightening credit independently of the ECB, thereby doing the central bank’s job, analysts say.
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