New leadership for the ECB

What challenges await the successor?

On 28 October 2019 Mario Draghi was officially relieved of his duties and thus leaves his post as President of the European Central Bank (ECB) after eight years. He is succeeded by the former Managing Director of the International Monetary Fund (IMF) and the erstwhile French Finance Minister Christine Lagarde.

Her predecessor leaves Christine Lagarde with a large number of challenges which have been caused by Draghi’s loose monetary policy. The first obstacle will be the key interest rate that currently amounts to zero percent followed by security and asset purchases totalling nearly three trillion euros. Moreover, Mario Draghi reduced the deposit rate to minus 0,5 %. In the opinion of most experts, Draghi saved the Eurozone on the ground that his loose fiscal policy led to higher investments, which in turn have created more jobs and higher wages. Indeed, the ECB’s number of alternatives are now stretched to the limits.

Christine Lagarde has defined clear goals for her term of office. First of all she wants to conduct a fundamental review of the previous measures of the ECB in order to evaluate their usefulness. Therefore, Lagarde wants the members of the European Central Bank Council to get involved as soon as possible. Furthermore, she calls on the countries of the Eurozone to invest more and to focus on fiscal and structural reforms to strengthen the ECB. At the same time Christine Lagarde is expected to calm things down inside the Central Bank as well as to positively change the reputation of the ECB. Finally, it remains to be seen whether she will meet the given expectations.