A year after she took office, the opinions of ECB boss Christine Lagarde are divided. Your greatest strength, critics say, could prove to be your greatest weakness. By Wolfgang Ehrensberger
One year after taking office, the participants in the economists’ barometer from € uro am Sonntag assessed the work of ECB boss Christine Lagarde in the November survey. According to school grades, the 64-year-old received an average grade of 3.1. There was no more a one than a six. 29 percent of the participants gave the two, 40 percent a three, twelve percent a four and 14 percent a five.
One thing is certain: Christine Lagarde did not yet have too much room for maneuver. She actually wanted to initiate a major strategy review at the central bank, but then the corona pandemic drove her into the parade and the recession of the century that it triggered. “So far, it has steered the ECB through the crisis well,” said Dirk Ehnts from Chemnitz University of Technology. And for the former ECB director Otmar Issing, Lagarde embodies a kind of cultural revolution at the central bank. “Your cooperative style suits the ECB extremely well.” But in terms of content, she put herself on a moving train, the direction of which her predecessor Mario Draghi have determined.
Even at the start, Lagarde surprised everyone with her biography: In November 2019, Draghi’s successor was the first female president without an economic education. The lawyer, formerly the French finance minister and head of the International Monetary Fund (IMF), did not want to be classified in the classic camps of pigeons and hawks, that is, supporters of a relaxed and a restrictive one Monetary policy. Rather, she wanted to be an owl, she said as she walked in. Owls embodied wisdom.
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“Christine Lagarde’s greatest strength is perhaps also her greatest weakness,” warns ZEW economist Friedrich Heinemann. “As a politician, she wants to explain ECB policy to a broader public. She does an excellent job at that.” But now the impression arises that she increasingly wants to implement climate and social policy. “If you exceed the mandate, you endanger the independence of the ECB in the end.”
Juergen B. Donges from the University of Cologne sees it similarly. Lagarde continues the Draghi course and worries about the financing of weak euro countries, even if this equates to monetary state financing. “The politician she is by default is going through with her. That will make the exit from the ultra-expansionary monetary policy more difficult.”
The leading economists surveyed in the Economists’ Barometer consider the exit from expansionary monetary policy to be the second most important goal of the ECB (47 percent), after price stability, which for most (67 percent) comes first. In third place is the credit supply for the economy (43 percent). In contrast, only a minority sees environmental or distribution policy goals (twelve or five percent) as an ECB goal.
The fact that Lagarde could overstretch the mandate is a major concern of many economists who have spoken. “I hope that she will resist this temptation,” says Deutsche Bank chief economist David Folkerts-Landau.
DIW President Marcel Fratzscher proves to be an unrestricted Lagarde fan (“Task excellently accomplished”). Bernd Raffelhüschen (University of Freiburg), on the other hand, considers it to be a complete wrong choice. Sylvain Broyer (S & P Global Ratings) conjures up the owl image again. “With owls, eyesight and hearing are excellent. With the upcoming review of the ECB strategy, listening will be particularly important.”