Christine Lagarde to leave ECB before the end of her 8-year term

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Christine Lagarde is expected to leave the European Central Bank before her eight-year term as president expires in October 2027, according to a person familiar with her thinking.

Europe’s top central banker, who joined the Frankfurt-based ECB in November 2019 from the IMF, wants to exit before the French presidential election in April next year.

According to the person with knowledge of her thinking, Lagarde wants to enable outgoing French President Emmanuel Macron and German Chancellor Friedrich Merz to find a new head for one of the EU’s most important institutions. It is not clear when Lagarde’s departure will take place.

“President Lagarde is totally focused on her mission and has not taken any decision regarding the end of her term,” the ECB said.

European economists polled by the FT in December regarded Spain’s former central bank governor Pablo Hernández de Cos and his Dutch counterpart Klaas Knot as top picks to become the next president of the Eurozone central bank. ECB executive board member Isabel Schnabel has said she is interested in the job, and people briefed on Bundesbank president Joachim Nagel’s thinking said he was also keen on the role.

People briefed on discussions in Paris have told the FT that Macron — who cannot run for a third term as French president — has for months wanted a say in choosing Lagarde’s successor.

Lagarde’s decision follows the move by French central bank governor François Villeroy de Galhau who announced this month that he would step down in June, 18 months ahead of the end of his term. Although Villeroy de Galhau said he had decided to leave to join a charity, critics have said Macron had cleared the way for him to be able to make the new pick.

The French presidential election in April next year will be crucial for the Eurozone’s second-largest economy and the wider EU.

Marine Le Pen, leader of the far-right Rassemblement National, is consistently polling ahead of rivals, putting her in pole position to make the run-off between two candidates in the final presidential ballot.

While Le Pen may be disqualified from running as the RN candidate after being convicted last year of embezzling European parliament funds, she said her protégé Jordan Bardella would step in in these circumstances. 

Both Le Pen, who is appealing against her conviction, and Bardella are Eurosceptics, which could complicate relations with European institutions such as the ECB.

Macron has also moved to bulletproof other key posts ahead of 2027, recently naming a close ally to the head of the national auditor.

Lagarde’s time at the ECB’s helm has been shaped by a series of crises, including the Covid-19 pandemic, Russia’s full-scale invasion of Ukraine and a trade conflict with the US.

Under her watch, Eurozone inflation surged to close to 11 per cent in late 2022, as energy prices shot up in the wake of Russia’s attack on its neighbour and global supply chains suffered pandemic-related bottlenecks.

The ECB raised interest rates from minus 0.5 per cent to 4 per cent in little more than a year.

From mid-2024, the central bank lowered borrowing costs to 2 per cent as inflation fell back to the ECB’s 2 per cent medium-term target.  

Lagarde’s appointment as ECB president came after Macron and then German chancellor Angela Merkel struck a surprise deal in 2019.

They agreed that Lagarde take over the ECB and then German defence minister Ursula von der Leyen become European Commission president.

Lagarde told Bloomberg TV last month that she accepted the ECB job under the impression that she would serve a five-year term, in comments seen by observers as potential preparation for an early exit.

She recalled how she told Macron after agreeing to the role of ECB president: “I’ll be in Frankfurt for five years. And at that point Macron said ‘No, for eight years’.”

In the summer of last year, an ECB spokesperson stressed that Lagarde “is determined to complete her [eight-year] term” after former World Economic Forum chair Klaus Schwab said the central bank president had discussed a potential early exit to take over leadership of the WEF.

“I regret to tell you that you’re not about to see the back of me,” Lagarde told reporters at the ECB headquarters in June.