European Council taps first woman to lead central bank

Christine Lagarde has been tapped as the next president of the European Central Bank, an appointment that would make her the first woman to lead the powerful institution.

The European Council announced Tuesday that Lagarde, the current head of the International Monetary Fund, had been chosen to succeed Mario Draghi, whose eight-year term ends in October.

She was one of two women selected for top EU jobs. Ursula von der Leyen, Germany’s defense minister, was put forward as president of the European Commission.

Lagarde would be one of only a few women to lead a major central bank. She would bring savvy political skills, and a touch of star power, to the ECB.

Donald Tusk, the president of the European Council, cited Lagarde’s international experience during a press conference, saying she would make a “perfect” president of the ECB.

Following the announcement, Lagarde, who is French, said she would temporarily relinquish her duties as managing director of the IMF during the nomination period.

Lagarde, a surprise pick, is not an economist. A lawyer by training, she previously served as France’s finance minister. She is well known in finance circles and is a frequent commentator on global economic matters.

Last year, Forbes ranked her third on its list of the world’s most powerful women, behind German Chancellor Angela Merkel and UK Prime Minister Theresa May. She’s been managing director of the IMF since 2011.

“She is well respected, able to forge compromises and to express herself well,” Holger Schmieding, chief economist at Berenberg, said Tuesday.

Lagarde’s nomination is part of wider jockeying among European countries for top EU jobs.

In addition to Lagarde and von der Leyen, Charles Michel, the prime minister of Belgium, was elected president of the European Council. Josep Borrell Fontelles, a Spaniard, was named the bloc’s foreign policy chief.

Lagarde’s profile makes her an interesting choice to succeed Draghi. The Italian is credited with saving the euro during Europe’s sovereign debt crisis and guiding a subsequent recovery in the region’s economy.

After taking over for Dominique Strauss-Kahn as head of the IMF in 2011, Lagarde joined the ECB and European Commission in organizing the second bailout for debt-laden Greece the following year.

The next ECB president will inherit a tough set of circumstances. Global economic growth is weakening, as Lagarde herself has warned for months.

“The global economy has hit a rough patch: investment has weakened and trade has slowed significantly, with export and import growth rates at their lowest level since the great financial crisis,” she said last weekend at the G20.

If conditions continue to worsen, it could require decisive central bank action.

Draghi said last month that he was open to boosting monetary stimulus if economic conditions in Europe don’t improve. That could mean interest rate cuts or the revival of a quantitative easing program that involves creating new money to buy assets such as government bonds.

Perhaps of greater concern: the next ECB chief won’t have much ammunition in the battle against low growth and inflation. As president, Draghi didn’t raise interest rates once, giving his successor little room to maneuver.