European Central Bank President Christine Lagarde plans to leave her job early, ahead of next year’s French presidential election, to give outgoing French leader Emmanuel Macron an input into picking her successor, the Financial Times said on Wednesday.
Lagarde’s term is due to end in October 2027, but some fear that the far right may win the French presidential race in the spring of 2027, complicating the selection for the new leader of Europe’s most important financial institution.
Citing a person familiar with the matter, the FT said Lagarde has not yet decided on the exact timing of her departure but was keen on Macron and German Chancellor Friedrich Merz to be the key deciders in who succeeds her. Macron cannot run again for a third term.
ECB SAYS NO DECISION MADE
“President Lagarde is totally focused on her mission and has not taken any decision regarding the end of her term,” an ECB spokesperson said.
The ECB’s response is a departure from an earlier guidance on Lagarde. Last year when the FT suggested Lagarde may leave early, the ECB said Lagarde was “determined to complete her term.”
Initial market reaction to Lagarde’s possible departure was muted. Bond yields and the euro were barely changed in early trading, indicating investors do not expect a personnel change to herald any major policy shift.
FRENCH GOVERNOR ALSO QUIT EARLY
The FT report comes only a week after Bank of France Governor Francois Villeroy de Galhau said he would step down in June this year, more than a year before the end of his term, allowing Macron to name his replacement before the presidential election.
While it will be up to all leaders from the 21-nation euro zone to pick Lagarde’s successor, past practice suggests that any successful candidate must have both German and French support to clinch the role.
There are no formal candidates for the job yet, but several names have been floating among ECB circles as potential ECB presidents.
KNOT, DE COS, NAGEL SEEN AS CANDIDATES
The most prominent among these are former Dutch central bank chief Klaas Knot, Bank for International Settlements General Manager Pablo Hernandez de Cos and Bundesbank chief Joachim Nagel.
ECB board member Isabel Schnabel has also said she was interested in the role but EU laws may prevent her from running since board members serve non-renewable terms.
However, Lagarde’s name did not surface until shortly before her own nomination seven years ago, suggesting that this race is unpredictable.
Lagarde would leave the ECB at a relatively tranquil time.
Inflation is at target, interest rates are in a neutral setting, and the euro zone’s economic growth is at potential, a rare combination that some have called a central banker’s nirvana.
With most if not nearly all major ECB decisions made by consensus, without a formal vote, the change atop the bank is unlikely to shift policy.
Markets currently expect the ECB to keep rates on hold for the rest of the year but exceptional uncertainty in the global environment could quickly alter the outlook.
Lagarde’s term runs until October 31, 2027. Prior to heading the ECB, she was managing director of the International Monetary Fund from 2011 to 2019 and before that, the French finance minister.
