ECB chief Lagarde to step down early, triggering succession race

The announcement comes at a difficult time in the eurozone.(AFP) — European Central Bank President Christine Lagarde will step down in February, months before her term ends, officials said Thursday, kicking off a race to succeed her against a turbulent backdrop in the eurozone and beyond.“It has been a great pride and a huge privilege to serve this institution,” Lagarde posted on X, announcing that she would resign nine months before her term officially ends in October 2027.“I think that I leave this institution with a sense of good work done and an ECB that is fit for the future,” she said.Lagarde’s early resignation opens the way for European leaders to choose a new ECB chief before French presidential elections in the spring, with officials fearing that a far-right victory could complicate talks to pick her successor.But it also comes at a difficult time in the eurozone as worries mount about France’s public finances and the central bank seeks to navigate the energy shock triggered by the U.S. war on Iran, with inflation currently almost double the ECB’s 2% target.European Commission President Ursula von der Leyen thanked Lagarde “for everything you have done for Europe and the euro.”German Chancellor Friedrich Merz said Lagarde had led the bank “with great aplomb during challenging times,” and French President Emmanuel Macron thanked Lagarde on X for her service “during a period marked by numerous crises.”Lagarde, who previously headed the International Monetary Fund and served as French finance minister, did not say what her next move would be.But she has ruled out running for the French presidency herself and has been mentioned as a potential candidate to take the helm of the World Economic Forum, which organizes the annual summit of politicians and business leaders in Davos, Switzerland.‘I don’t think I can remain neutral’Lagarde, who served in the governments of France’s center-right presidents Jacques Chirac and Nicolas Sarkozy, has also hinted that she could get involved in campaigning for the presidential vote, saying it was important to have a “European voice” in debates.Speaking at the end of a regular ECB monetary policy news conference Thursday, Lagarde said she was quitting so she could intervene in politics.“I want to have the freedom of speech, the freedom of expression and the freedom to engage on matters that are not monetary policy matters,” she said.“I don’t think that I can remain neutral. I don’t think that I can be comfortable in that neutrality at the present time.”Her tenure was marked by repeated geopolitical upheavals that often left policymakers struggling to fulfill the ECB’s main task of keeping consumer prices in check.The COVID-19 pandemic, Russia’s invasion of Ukraine and the subsequent energy shock — which pushed eurozone inflation to a record of more than 10% — the U.S. tariff blitz and now the fallout from the Iran war all severely tested the institution.The ECB’s governing council, which sets interest rates for the 21-member single-currency area, faced criticism, particularly during the 2022 inflation surge, for responding too slowly.But officials also won praise for seeking to overhaul the central bank so it is better prepared for a more uncertain world, introducing new tools to combat crises and seeking to communicate its decisions more clearly.Succession raceEuropean Council President Antonio Costa said the process to appoint Lagarde’s successor would begin immediately to ensure a “smooth transition.”The front-runners to succeed her are seen as former Dutch central bank chief Klaas Knot and Spain’s Pablo Hernandez de Cos, currently head of the Bank for International Settlements.One EU diplomat, speaking on condition of anonymity, said Knot was seen as the preferred candidate because he was an experienced crisis manager and a good communicator.But there are likely to be frantic negotiations in the coming weeks between European capitals as several top ECB officials are due to be replaced — Lagarde, executive board member Isabel Schnabel and chief economist Philip Lane.Holger Schmieding, chief economist at Berenberg bank, predicted that EU leaders would try to fill the vacancies “as a package, no later than the EU summit of 17-18 December, and possibly beforehand.”Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads