Lagarde leaves the ECB before the French presidential election: Europe must choose its central banker in the open

The facts

The European Central Bank announced it on Thursday 29 October in a press release: its President, Christine Lagarde, has informed the Governing Council and the President of the European Council, António Costa, that she will leave her post on 7 February 2027. Her term was due to run until the end of October 2027. According to the ECB, her successor will be appointed by the European Council under the procedure set out in Article 283 of the Treaty on the Functioning of the European Union.

In a short video quoted by Reuters, the former French Economy Minister says she is leaving with a sense of a job well done, leaving behind an institution

"ready to face the future" — Christine Lagarde

The press release gives no reason for this early departure. A source close to the matter, quoted by Reuters, says she "could no longer remain neutral in the face of the French political situation". The agency reported in mid-October that the World Economic Forum in Davos could appoint her as its head as early as November; nothing has been made official so far. AFP notes that she ruled out any run in the presidential election at the end of September.

The announcement came a few hours before the monetary policy decision. According to Reuters, the ECB left its rates unchanged, with the deposit rate staying at 2.50%, after two increases this year. The institution believes that inflation risks are rising: price growth reached 3.8% year on year in September in the euro area, with oil above 100 dollars a barrel because of the conflict in the Middle East.

The French calendar in the background

The date is not insignificant. As AFP and Reuters point out, a departure in February allows Emmanuel Macron and the other European leaders to choose the successor before the French presidential election in spring 2027, which polls describe as open to a victory for the Rassemblement national. The Financial Times had raised this scenario as early as February; Christine Lagarde denied it at the time, recalls the AOF agency.

The French situation is also weighing on the markets. According to Reuters, France's ten-year borrowing rate recently hit a 24-year high, and its risk premium over Germany is the highest in the euro area. Christine Lagarde said this month, in Bangkok, that the solution lay first and foremost in France, in its fiscal policy, reports Euronews.

For her succession, two names stand out according to Reuters: the Dutchman Klaas Knot, former governor of the central bank of the Netherlands, and the Spaniard Pablo Hernández de Cos, former governor of the Bank of Spain, officially backed by Pedro Sánchez. António Costa promised to launch the process "without delay". The German Finance Minister, Lars Klingbeil, said Berlin would use its influence to ensure the future leadership enjoys broad support.

The positions at stake

For the defenders of this timetable, it is an act of responsibility. The ECB is the only federal institution of the euro area able to act quickly in a crisis. Its Transmission Protection Instrument, created in 2022 and never used, could one day concern France, Reuters recalls. Ensuring continuity at its head before an uncertain election would, on this reading, be a matter of basic prudence.

The objection is a serious one too. Choosing the head of the single currency a few weeks before the French go to the polls may be seen as a way of getting ahead of the vote. On the left, an older criticism remains: rising rates protect purchasing power against inflation, but they make credit more expensive for households, businesses and local authorities, and hold back the public investment that the ecological transition needs.

The analysis

Both sides must be held together. Central bank independence is a precious guarantee: it shields the currency from the temptations of the moment, and those who lived through repeated devaluations know what it protects, starting with the savings of the most modest. But an independence that is lived behind closed doors ends up turning against itself. An institution that sets the cost of money for 350 million Europeans must be able to explain its choices, and its leaders must be appointed in the open.

Christine Lagarde's departure is also a reminder of a less comfortable truth for Paris. If France relies so heavily on Frankfurt, it is because its own debt makes it vulnerable. It is not for the ECB to fix our public finances. It is for the nation to do so, through fairer taxation, in particular of the highest incomes and the largest profits, rather than by cutting public services alone. A sovereign country does not delegate its fiscal soundness to a central bank, even a European one.

Finally, the stakes go beyond a single name. With the announced departures of other Executive Board members, according to AOF, a large part of the ECB's leadership could be renewed within a few months. France must defend there a central bank as attentive to employment and the climate as to price stability, in keeping with the treaties.

Conclusion

The European Parliament will be consulted, as the treaty provides. It would be useful to go further: the candidates should set out their doctrine publicly, before MEPs but also before the finance committees of national parliaments, including the Assemblée nationale and the Sénat. Choosing quickly does not rule out choosing transparently. Will European leaders manage to turn this succession into a moment of democratic trust rather than a calendar manoeuvre?

Article written with the help of artificial intelligence.