European Central Bank President Christine Lagarde will step down on Feb. 7 next year, she announced Thursday, formally kicking off a succession race shaped by political bargaining and France's looming fiscal crisis.
Lagarde has led the central bank since July 2019, steering its responses to the Covid-19 pandemic, the Russia-Ukraine war and a series of energy price shocks that sent inflation in the European Union above 11% in 2022. She will depart nearly nine months before her term was due to expire in October 2027, with the process to appoint her successor beginning immediately.
Senior ECB figures are already in talks to fill other top roles, with chief economist Philip Lane and executive board member Isabel Schnabel also due to step down next year. The ECB is institutionally independent, and its Governing Council comprises the six-member Executive Board and the governors of the 21 euro-area national central banks, whose voting rights rotate. Appointments to its top jobs, however, are made by euro area governments, with negotiations generally reflecting political bargaining over national representation and influence.
Who could replace her
Former head of the Netherlands central bank, Klaas Knot, and former head of Spain's central bank, Pablo Hernández de Cos, are widely regarded as top contenders. "Both are excellent candidates," ING's global head of macro, Carsten Brzeski, told CNBC by email. He noted nationality will also matter, with Knot potentially finding more support among Northern European governments, while it remains unclear whether De Cos would be backed by the current Spanish government.
Berenberg Chief Economist Holger Schmieding said the ECB would need a successor able to deal with potential financial turbulence amid widening spreads in bond yields between member states, as France faces a mounting sovereign debt crisis with further uncertainty ahead of next year's election. "As a former chair of the G20's Financial Stability Board (FSB), Knot may have an edge in this respect," Schmieding said, adding that "the ECB has no mandate and no appetite to fund French fiscal follies" and would only support France if Paris returns to more sustainable policies.
The announcement came ahead of the ECB's latest monetary policy decision and Lagarde's usual press conference. The central bank was expected to hold interest rates despite inflation in the 21-nation euro zone hitting a three-year high in September. Lagarde received a standing ovation from the Governing Council on Thursday. "It has been a source of great pride to serve this institution. I thank all of those who have supported me on this journey over the past seven years," she said. European Council President Antonio Costa said she had provided "steady and determined stewardship, helping to safeguard stability and the resilience of the euro area."
Lagarde, born in Paris in 1956, first worked as a high-ranking lawyer before joining the French government. In 2007, she became the first female Finance Minister of a G7 country, and was appointed managing director of the International Monetary Fund in 2011, the first woman to hold the post, before joining the ECB. In 2024, a staff survey gave a heavily critical verdict on her tenure, suggesting many felt she spent too much time away from the institution.
Source: CNBC
