Arch-Globalist Christine Lagarde Picked to Head European Central Bank

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FABRICE COFFRINI/AFP/Getty Images
John Carney

Christine Lagarde is both an arch-globalist and a very Trumpian pick to run the European Central Bank.

The International Monetary Fund chief was picked by European leaders to run the Frankfurt-based central bank, taking over the top role from Mario Draghi. Like Jerome Powell, whom President Donald Trump tapped to run the Fed, Lagarde is a lawyer by training rather than an economist or a central banker.

Once she receives final approval and takes office, two of the world’s most powerful central banks and the two biggest currency zones will be lead by non-economists for the first time in modern history.

Although she has been called an “arch-globalist,” Lagarde is not blind to the costs of global trade on workers in the U.S. and the rest of the developed world. But instead of advocating a Trumpian policy of trade deals that create or protect good jobs, she’s argued for a European-style welfare state, higher minimum wages, and direct financial support to compensate workers displaced by global trade. Instead of economic nationalism, she supports a program she calls “new multilateralism.”

“Tackling inequality requires partnership,” Lagarde said in a speech last year. “It requires governments, the private sector, and civil society working together: to eradicate discrimination against women; design the right labor market reforms; and strengthen education, training, and social protection systems—to include people, not exclude them, and prepare them for the coming technological transformation.”

In other words, the solution to problems created by globalism is to give the people more globalism, good and hard.

Prior to taking over the Washington-based IMF eight years ago, Lagarde served as France’s finance minister. Before that she spent her career as an antitrust attorney at the Chicago-based law firm Baker & McKenzie.

European leaders may hope that Lagarde will repair the reputation of the ECB, which has been accused both of impoverishing German savers with low interest rates and with hurting peripheral European economies with a too tight monetary policy. Lagarde was deeply involved with securing bailouts for the debts of ailing European economies, particularly Greece, in the aftermath of the financial crisis.

Although she has no monetary policy experience, it is widely suspected she will be an interest rate dove and might support further interest cuts to stimulate Europe’s flagging economies. The current ECB chief announced last month that he would begin a stimulus policy in the coming months—a policy Lagarde is expected to continue and perhaps expand.

Trump has both criticized and praised the ECB move to ease monetary policy. He has called it unfair to the U.S., pointing out that easing the stance of monetary policy in Europe is likely to devalue to the euro and give European exports a boost over U.S. products. He has also lamented the reluctance of the U.S. central bank to ease, saying he wished he had a Draghi running the Fed.

It is likely that Trump will see Lagarde in a similar light if she continues Draghi’s stimulus plans. If she truly ends up as supportive of stimulus as some expect, Trump might turn critical and accuse her of waging a currency war.

Lagarde has been critical of Trump and his trade policies. Prior to the 2016 election, she “launched a thinly veiled attack on the anti-free-trade sentiments expressed by US presidential candidate Donald Trump in a speech calling for globalisation to be made to work for all,” the Guardian reported. Criticism of tariffs has become a recurrent theme for her throughout the Trump presidency. Last month, she said “there is strong evidence that the United States, China, and the world economy are the losers from the current trade tensions.”

Just a few days ago, Largarde sparked controversy after a video clip released by French authorities showed her apparently reacting with a brief look of contempt or disdain to a comment made by Ivanka Trump in a conversation backstage at the G-20 meeting in Japan.

Lagarde has also lined up as an opponent of the growing populist wave around the globe, which could limit her ability to repair the battered reputation of the ECB. Just prior to the 2016 Brexit vote, she implied pro-Brexit voters were narrow-minded and called for a “united Europe. Under her leadership, the IMF also called for Spain to admit millions of migrants to bail out its pension system.

Critics accuse Lagarde of coddling China. In April, Lagarde praised China’s efforts to stimulate its economy amid signs of stress from U.S. imposed tariffs. But while she has often praised China’s leaders she has also called for greater transparency in its economy and its belt-and-road lending to developing nations. As head of the IMF, Lagarde sought to “give emerging economies such as China” more say in how the fund operates, Bloomberg reports.

In 2016, Lagarde appointed Tao Zhang, a Deputy Governor of the People’s Bank of China, as Deputy Managing Director of the IMF. “Ms Lagarde has spent much of the past five years working on both reassuring Beijing of its importance, and securing a greater voice for China within the IMF and one that is more representative of its place in the global economy,” the Financial Times reported after that appointment.
Trump and Lagarde have met several times but not mentioned each other by name much on social media. Trump has never tweeted about Lagarde, while she tweeted about him only once.

 

 

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