Lagarde: I hesitated over taking Mario Draghi’s job at ECB

Bloomberg

Christine Lagarde didn’t immediately jump at the chance of succeeding Mario Draghi as president of the European Central Bank — but needed some convincing.
That’s what the former chief of the International Monetary Fund revealed to Francine Lacqua in New York this week, in a Bloomberg Television interview that also offered insights into her likely management style, and even the inspiration she draws from the Pope. Here is a selection of some highlights.
Lagarde, 63, clinched the ECB presidency in July after a protracted tussle between European Union countries over the region’s top roles. She was hesitant because she loved her old position and was also unsure if she was up to the job of leading monetary policy in the world’s biggest currency area.
“Everybody assumed: oh she’s never been a central banker before, how can she do that job? I’m not an idiot, and I don’t have enough vanity to assume I can do anything. So I talked to a lot of people who had been central bank governors, whom I trusted, who knew the job. And they all supported
me, and they all confirmed that yes, under current circumstances, and given the strength of the institution and the situation we are in Europe, I had to say yes.”
Lagarde’s soundings also left her persuaded that the nuts and bolts of monetary policy won’t necessarily be the most crucial aspect of her role.
“The point that they made very clearly to me, and which I believe as well, is that a lot of diplomatic skills, political sense, understanding of the perspectives of finance ministers and euro country leaders, all of that will matter probably more than a deeply acquired, ingrained market experience of monetary policy determination.”
With that in mind, she emphasized that she’ll be relying heavily on the people surrounding her at the ECB to drive her agenda. That may include one person in particular, Chief Economist Philip Lane, whom she specifically mentioned.
“There is such a strong and intelligent and powerful staff within the institution that I will get the right support, the right expertise. There’s a fantastic member of the Board, Philip Lane, who was himself former governor of the Central Bank of Ireland — and the board members are talented in their own respects.”
In little more than a month, Lagarde will take charge of an institution reeling from an
unprecedented policy dispute over the resumption of quantitative easing. Governors sparred over the matter in public and one Executive Board member, Sabine Lautenschlaeger, subsequently resigned. Lagarde hinted that she may try to restore discipline.
“You’re only strong and convincing if you are strong at home. So making sure that we are a team, that we disagree amongst ourselves and then, once the disagreement is settled, once there is a common line, that we all move together — I think that has a huge impact.”
She also shared her views on engaging with counterparts.
“Listen enough to put yourself in the other person’s shoes, and then you understand her or his perspective, their perspective, where they can move, where they can’t move, what difficulty they’re facing.”
While not a central banker, Lagarde is still a crisis veteran — not only of the financial emergencies of 2008, but also the sovereign debt turmoil that affected Greece and the euro region. She remembers one moment in 2010 when “many of us felt that the euro was gone.”
“There was a G-7 going on, and I was on the phone, and in the room, and getting out of the room to check with G-7 colleagues. And you know, we were seeing the clock moving, the Sydney markets opening, the Tokyo markets opening, the Hong Kong — I mean it was like ‘we’ve got to come out with something.”’
Lagarde says the region may need to pool budget resources more in future to protect the integrity of its currency.
“More needs to be done — you’ve heard that many times — to complete the banking union, make sure that there is a European security market that is deeper and broader, having enough of a fiscal space that is in common — however you call it — but that can be used eventually to stabilise.”