Total radio silence while markets are imploding. This is Trichet level incompetence. Criminal!!!
Big shoes to fill
Christine Lagarde took over the ECB from Mario Draghi in 2019. Draghi was widely respected as the man who saved the euro. He promised to do ‘whatever it takes’ when prices for bonds of large euro countries were unsustainably low. Furthermore, Draghi introduced monetary policy tools that were considered radical at the time, such as quantitative easing (buying bonds) and targeted refinancing operations (lending to banks).
Critics suspected that Lagarde would be no match for her predecessor. Indeed, Draghi was an economist and former banker. By contrast, Lagarde was ‘merely’ a lawyer and politician.
Maybe that is why her opponents would systematically underestimate Lagarde. Time and again during her presidency, she followed the same strategy. Instead of trying to come up with new ideas herself, she listened to all options. Not just those of an inner circle of old central bankers and professors, but especially the alternatives suggested by junior staff and independent thinkers. Once Lagarde made up her mind on the right course to follow, she used her political skills to win the day.
The 2020 review
But let’s return to the start. Although Draghi’s ECB had performed better than under the disastrous Trichet, all was not well. Unemployment in the euro area was high. The ECB’s interest rates were negative. Inflation in the euro area was below the two percent target. The contemporary consensus said that the central bank was out of ammo.
It was in this context that Lagarde launched a monetary policy review. She wanted to know how the ECB could boost economic growth and fight climate change.
The policy review set in motion the bureaucratic cogs of the ECB. Meanwhile, Lagarde was subtly consolidating her power. She kept a tight grip on meetings and did not tolerate leaks. She also improved communication with national leaders and the European Parliament.
But most importantly, Lagarde read the Internet. And what she read did not make her happy. Lagarde’s advisors had assured her that the ECB’s hands were tied. They claimed that the institution was powerless in the current macroeconomic environment and that fiscal stimulus was needed.
But online, she discovered that central banks had historically used instruments that none of the very serious people were talking about. It was as if everybody suffered from amnesia.
In the spring of 2020, Lagarde held a secret meeting with three outsiders. The quartet of conspirators hatched a plan…
Next episode: the conference of the long knives
First episode: Paris, 2076
Eulogy by Aya Sissoko, President of the ECB, 8 January 2076
It is with great sadness that we say farewell to our honorary President and dear friend Christine Lagarde today.
Madame Lagarde will be fondly remembered as the fourth President of the European Central Bank, the predecessor of the Euro Central Bank.
Christine became President during a protracted malaise in the euro area. By throwing off the yoke of false dogma, she revitalized the ECB. Her curiosity, vision and political prowess changed the course of history.
Under her leadership, the ECB showed the world how to handle the climate transition. At the same time, the euro economy grew at a rate previously believed to be impossible.
Ask any of the Seven Bankers, and they will all agree: Christine was the first modern central banker. Her autobiography, published 30 years ago, is still a must-read.
Christine’s career set the gold standard for our profession. Not just for what she did during her presidency, but also for what she didn’t do.
Her resignation in the wake of the Crisis of 2033 was a clear statement against the all-powerful central banker. During her retirement, Christine refrained from commenting on current events.
Christine, Madame Lagarde, you were born Lallouette – the lark – but you will always be The Owl of Frankfurt.
On behalf of the 1.4 billion people who use the euro every day,
Next episode: Lagarde discovers her powers
Why is science fiction always about space or robots? Nobody cares about that kids’ stuff. ‘Pew pew, shooting at aliens’, how original 🙄
No, people want to read about central banks!
How did Christine Lagarde become the most powerful banker in history?
You’ll find out here, starting 02/02/2020…