Update: After three days of heated wrangling, the European Council has selected its nominees for four of the bloc's top jobs, breaking a troubling deadlock that had exposed the cracks in the status quo's facade. And the biggest surprise is that the consummate politician and connoisseur of Louis Vuitton handbags, Christine Lagarde, who is currently busy justifying the IMF's crisis fighting budget, has been picked to replace Mario Draghi whose term runs out on Oct 31.
According to the prime minister of Luxembourg, the European Council has nominated Charles Michel to stand for EU Council president, Ursula von der Leyen to lead the EU Commission, Joseph Borrell as high rep for foreign affairs and Lagarde to replace Mario Draghi at the ECB.
Done! Decision found at #EUCO:— Xavier Bettel (@Xavier_Bettel) July 2, 2019
For @EUCouncil we decided on @CharlesMichel as our president, Ursula #vonderLeyen is our @EU_Commission candidate nominee, for HRVP we nominate @JosepBorrellF & @Lagarde is proposed for @ecb presidency.
Though it's not a guarantee, Lagarde's nomination means it's incredibly likely that she will be confirmed to succeed Draghi. The new leaders of the some of the bloc's most important bodies will officially take over on Nov. 1.
Lagarde's nomination is a sign that the ECB is standing by its commitment to 'diversity' (though her background and views are extremely similar to Draghi's). The ECB had said it wanted a woman to lead the central bank, and now it appears extremely likely that will happen.
Donald Tusk, the outgoing head of the European Council, praised Lagarde as the "perfect" ECB president, and that he's absolutely sure about her "independence" (by that, we imagine he means her willingness to stick with Draghi's uber-dovish policy program). Emmanuel Macron, meanwhile, praised Lagarde for her "experience" and "competence." And we imagine he won't be the last EU leader to heap praise on Lagarde.
And for what it's worth, Lagarde said she's "honored" to be nominated, and that she will temporarily step aside at the IMF until she is either confirmed at the ECB, or rejected.
I am honored to have been nominated for the @ECB Presidency. In light of this, and in consultation with the Ethics Committee of the IMF Executive Board, I have decided to temporarily relinquish my responsibilities as IMF Managing Director during the nomination period.— Christine Lagarde (@Lagarde) July 2, 2019
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After failing to push through her pick to succeed Jean-Claude Juncker at the helm of the European Commission, 'lame duck' German Chancellor Angela Merkel is instead proposing a more palatable pick to succeed Mario Draghi at the ECB.
Virtually guaranteeing that the Draghi-era stimulus will only accelerate, Merkel and several other officials involved in the selection process have settled on IMF head Christine Lagarde. BBG described Lagarde's candidacy as "one of the key pieces in the latest slate of candidates for the EU’s top jobs which leaders, lawmakers and parties have been wrangling over since Sunday."
It's fair to assume that Lagarde would kick the central bank's money-printing into high gear. Though she has on occasion expressed skepticim, she has also praised the PBOC and its untrammeled stimulus.
More recently, during an interview with CNBC back in April, Lagarde warned that the global economy is mired in a "delicate moment" and that Trump's trade wars are responsible for these problems. This was around the time the IMF issued its latest slashed forecasts for global growth.
With so many investors, banks, businesses ad others desperately hoping that the world's central banks will keep the economic expansion alive, instead of deliberately killing it.
Though they recently feuded over Merkel's plan to install Franz Timmermans as the European Commission's next president, apparently, the leaders of the eurozone's two largest economies have reached a compromise to fill the two most important bloc-level jobs, including Draghi's soon to be vacant post.
German defense minister Ursula von der Leyen is emerging as the latest frontrunner to lead the commission after eastern member states and the EPP, Europe’s center-right political party, objected to a package floated over the weekend that would have seen Dutch socialist Frans Timmermans take that post.
Officials in Berlin say that Chancellor Angela Merkel is a fan of Lagarde and she would enjoy widespread support from among the governing Christian Democrats. The combination of Lagarde and Von der Leyen however was proposed by French President Emmanuel Macron in a conversation with Merkel on Monday night, an EU official said.
Of course, under the European tradition of filling these jobs by horse-trading, Lagarde's candidacy must be accepted by all parties alongside the nominees to the four other key bloc-level posts. Fortunately, Lagarde reportedly enjoys wide-ranging support among the center-right and center-left in the EU Parliament.
Given her embrace of aggressive stimulus, Lagarde's appeal is expected to be broad as most bloc leaders are hoping to save Europe from the brink of yet another recessionary slip. That's something Bundesbank President Jens Weidmann, a notorious hawk, should keep in mind: Now's not the time for 'normalization'. And after Mario Draghi's latest "whatever it takes" moment, whoever leads the central bank next will be under tremendous pressure to maintain the status quo.