EU leaders considering IMF chief Christine Lagarde as new central bank head

European Union leaders are considering making International Monetary Fund Managing Director Christine Lagarde the next president of the European Central Bank, according to officials briefed on discussions at a summit in Brussels on Tuesday.

Lagarde’s name is 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.

Successive plans have been proposed, debated and then shot down during negotiations that are also seeking a head of the European Commission, a foreign policy chief, a president for the EU Parliament and a chair of the bloc’s summits.

The French IMF director’s name also came up in earlier combinations that fell through due to disagreements over who would lead the commission. The presidency of the EU’s executive arm is the key sticking point because it requires the approval of an unruly and fragmented European Parliament.

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.

Leaving Washington
 

Under the EU’s culture of horsetrading, the five key posts are all inter-related so Lagarde’s candidacy for the central bank job depends on leaders and lawmakers agreeing on the rest of the slate.
 

Lagarde, 63, would become the first ECB president who’s not a professional economist and the second French national to lead the Frankfurt-based institution. Before joining the IMF, she was finance minister of France.

If she swaps Washington for Frankfurt, Lagarde would inherit an economy which likely just received a fresh dose of monetary stimulus. 
 

ECB watchers at Bloomberg Economics and Goldman Sachs Group Inc. are among those who expect Draghi’s ECB to cut interest rates in September in a bid to spark lackluster inflation.

Investors will likely bet Lagarde will share Draghi’s taste for aggressive and innovative monetary policy and her appointment would mean the more hawkish Bundesbank President Jens Weidmann misses out.

The Next Slowdown
 

Lagarde recently described the world economy as hitting a “rough patch” and advised central banks to continue to adjust their policies in response. In the past, she has praised Draghi’s 2012 commitment to do “whatever it takes” to save the euro and has echoed his call for governments to do more to battle future downturns.

"She is very well connected at the political level to her counterparts within the region and more broadly," said Ned Rumpeltin, the European head of currency strategy at Toronto-Dominion Bank. "That could be very important if and when the euro area faces a deeper slowdown."

Lagarde was also the first woman to serve as managing director of the IMF. She was first appointed in 2011 and handed another five year term in 2016. Taking the ECB job would mean leaving more than 1 1/2 years before her mandate ends, likely sparking a fight between capitals over whether Europe should maintain its lock on the lender’s top job or accept that it’s time for an emerging-market candidate.