Christine Lagarde

The European Council has nominated IMF chief Christine Lagarde as the new president of the European Central Bank, giving a self-confessed economic outsider the challenge of helping stimulate the eurozone economy.

If confirmed by European leaders, Lagarde would be the first woman to serve as ECB president and the first head of the bank without any direct experience of setting monetary policy.

She has led the IMF since 2011 and would succeed Italian economist Mario Draghi at the ECB. Draghi has been wrestling with how to jolt economic growth in Europe as fears of recession have mounted amid trade conflicts with the United States, tensions in the Middle East, and Britain’s push to leave the European Union.

Last month, Draghi said the ECB would announce further stimulus if the region’s economic situation deteriorated further.

According to The Guardian, Lagarde’s options may be limited since interest rates “are already at record lows of zero and -0.4% for bank deposits. However, she could take the main interest rate into negative territory or deploy more unconventional policies, such as expanding quantitative easing.”

“Lagarde would be expected to lean broadly dovish on monetary policy while pressing fiscal authorities to play a more active role in promoting eurozone growth,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note.

“Specifically we think she would back what we expect will be one last big dovish play from Draghi in September: an easing package that includes both a 10-15 bp rate cut and a new QE program at around 30 billion euros a month of purchases,” he added.

At the IMF, the former French finance minister has been credited with turning around the Washington-based organization after a sex scandal involving her predecessor Dominique Strauss-Kahn.

“Lagarde’s diplomatic skills are legendary at the IMF,” The Guardian said, noting that the ECB is “split between anti-austerians and expansionists, with Italy’s Matteo Salvini demanding an easing of EU and ECB rules to allow for higher spending while the Germans seek to keep a tight rein on their neighbors’ budgets.

Photo: AFP/Getty Images

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