Christine Lagarde’s ECB Top Team Is Running Out of Economists
Christine Lagarde’s nomination as president of the European Central Bank has sparked controversy over whether she’ll be up to the job. But there’s another position to fill at the top of the ECB that’s nearly as important.
Benoit Coeure, a member of the bank’s six-strong executive board, will leave at the end of December after serving an eight-year term. Alongside Peter Praet, the former chief economist, Coeure has been one of the ECB’s sharpest economic minds, helping president Mario Draghi shape and explain his policy decisions.
With Lagarde lacking an academic background in economics, Coeure’s departure will leave Praet’s successor Philip Lane as the main monetary brain in the ECB’s top team. Europe’s leaders would be wise to select another top-notch economist. This would also dispel fears that the bank has become unduly politicized.
Throughout his term, Coeure – a former senior official at the French Treasury – has given some of the most interesting and best-researched speeches of all executive board members. If Praet dug deeply into the ECB’s decisions, and Draghi provided vision on where the euro zone should go, Coeure ranged broadly across different policy areas in rigorous and thought-provoking fashion. From the relationship between wages and unemployment to what central banks should do about climate change, he was happy to investigate most subjects.
Coeure’s record at the ECB wasn’t flawless. In 2015 he came under fire for telling a closed-door meeting attended by bankers and asset managers that the central bank would front-load its bond-buying program. His speech was only transmitted more widely the following morning when markets, including the euro, had already moved in response. The ECB has since tightened its transparency policy, ensuring the immediate release of private presentations.
Yet the Frenchman would have been an excellent successor to Draghi if Europe’s leaders had chosen to back him. Coeure has been overlooked for a top job once before, when the former French president Francois Hollande picked Francois Villeroy de Galhau as governor of the Banque de France.
Lagarde has many assets, of course, not least a stellar career that includes running the IMF and a stint as France’s finance minister. Her political and diplomatic skills will be useful in a riotous currency union. As a lawyer, though, she lacks the expertise of her predecessor and her executive board will also need some economic bolstering when Coeure departs. Luis de Guindos and Sabine Lautenschlaeger have their primary expertise in banking matters, while Yves Mersch is another lawyer. There’s a danger that too much of the heavy intellectual lifting will fall on Lane’s shoulders.
Some expect Coeure’s role to go to an Italian. Since the ECB’s creation, Germany, France and Italy – the euro zone’s largest economies – have pretty much continuously had a seat on the executive board. But there are doubts about Italy’s populist government nominating a suitable candidate. One possibility is Fabio Panetta, the Bank of Italy’s director general. An economist by training, Panetta has been very critical of the way the ECB and the European Commission have handled Italy’s banking crisis, a view he shares with his government. Other countries may prefer to hire from elsewhere given that Andrea Enria, the head of the ECB’s supervisory arm, is also Italian.
Indeed, Europe’s leaders would be wise to look beyond nationalities. The ECB needs an economist who can speak clearly to markets. Lagarde understands the problems of the global economy but she’ll need advice on designing monetary policy, especially if the euro zone stumbles into a new crisis.
Most important, appointing an independent-minded economist would reassure those who fear that too many politicians are taking positions at the ECB. Central bankers such as Draghi and Coeure have served the euro zone well because they weren’t afraid to do what was needed, regardless of whether political leaders agreed. Finding similar is not a bad recruitment policy.