FRANKFURT: European Central Bank President Christine Lagarde plans to leave her job early, ahead of next year’s French presidential election, to give outgoing French leader Emmanuel Macron a say in picking her successor, the Financial Times said on Wednesday.
Lagarde’s term at the head of Europe’s most important financial institution is due to end in October 2027, but a victory by the euro sceptic far right in the spring 2027 presidential vote could complicate selection of the next ECB chief.
As the EU’s second biggest economy, France traditionally has a big input in the choice and no ECB president has been picked without a sign-off from Paris.
Concerns about central bank independence have risen since U.S. President Donald Trump waged a campaign against Federal Reserve Chair Jerome Powell, demanding the Fed cut interest rates sharply.
Citing a person familiar with the matter, the FT said Lagarde had not yet decided on the exact timing of her departure but was keen that Macron and German Chancellor Friedrich Merz be the key European leaders choosing who succeeds her. Macron cannot run for a third presidential term.
ECB’s Lagarde focused on job, not taken decision on leaving, ECB says
ECB says Lagarde has not made a decision
“President Lagarde is totally focused on her mission and has not taken any decision regarding the end of her term,” an ECB spokesperson said.
The ECB’s response is a departure from earlier guidance on Lagarde. Last year, when the FT suggested she may leave early, the ECB said Lagarde was “determined to complete her term.”
Market reaction to Lagarde’s possible departure was muted on Wednesday as none of her potential successors are expected to radically alter policy.
Three big ECB jobs could be in play
“The ECB takes monetary policy decisions by building consensus, and whoever replaces Lagarde is unlikely to radically shift or change the way the ECB works, in particular should her replacement be one of those being touted in the media,” Andrzej Szczepaniak, an economist at Nomura, said.
Lagarde’s early departure could also strengthen the case for EU leaders to make upcoming ECB Executive Board appointments asa package as the terms of chief economist Philip Lane and market operations chief Isabel Schnabel expire next year.
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Since ECB presidential appointments are subject to political horse trading, filling the three jobs together may make sense, especially as the bloc’s biggest nations – France, Italy and Germany – have a de facto permanent seat on the board.
Candidates for the top job most often mentioned include former Dutch central bank chief Klaas Knot, Bank for International Settlements General Manager Pablo Hernandez de Cos and Bundesbank chief Joachim Nagel.
Schnabel has also said she was interested in the role but EU law may prevent her candidacy since board members serve non-renewable terms.
“All the likely candidates are mainstream central bankers and, even if the eventual successor is not one of the current supposed front-runners, he or she would be sure to be from a similar background,” Andrew Kenningham at Capital Economics said.
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Bank of France governor also quit early
The FT report comes only a week after Bank of France Governor Francois Villeroy de Galhau said he would step down more than a year before the end of his term, allowing Macron to name his replacement.
That move was condemned by the far-right Rassemblement National which said it was aimed at putting in place anti-RN allies in case there was a change of power in France.
Villeroy reiterated on Wednesday that his choice to step down was a personal one.
Polls show either RN leader Marine Le Pen or her protégé Jordan Bardella could win the presidential election, although the nationalist, anti-immigrant party has made little headway with France’s economic establishment, which frets over its shifting positions.
While it will be up to leaders from all 21-nation euro zone to pick Lagarde’s successor and could technically pick a candidate France disagrees with, past practice suggests a candidate needs both German and French support to clinch the role.
Some analysts also questioned whether an attempt to bypass the far right, or far left, could have unintended effects.
“The road to hell is paved with good intentions and (Lagarde) has very honourable intentions,“ said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.
“But this would send the signal that European elites are trying to control the institution and it could prove counterproductive for everything else that the EU is trying to achieve,” he said.
On Wednesday in Britain – outside the European Union – the populist Reform UK party, which is leading in opinion polls, said it would make changes to the way the Bank of England operates, but stressed it would respect its independence.
ECB in a ‘good place’
Lagarde would leave the ECB at a relatively tranquil time.
Inflation is at target, interest rates are in a neutral setting, and the euro zone’s economic growth is at potential, arare combination that some have called a central banker’s nirvana.
Markets currently expect the ECB to keep rates on hold for the rest of the year but exceptional uncertainty in the global environment could quickly alter the outlook.
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