Christine Lagarde, nominated to head the European Central Bank (ECB), has a politician’s ability to communicate and forge compromise, skills she will need to follow ECB President Mario Draghi’s performance as the central banker credited with defusing the eurozone’s debt crisis with a few well-chosen words.
She has backed Draghi’s stimulus efforts in her current post as IMF managing director, although her exact views on the often-arcane issues involved in central banking are less known.
Lagarde, 63, was nominated by the eurozone’s 19-member governments on Tuesday to succeed Draghi, whose eight-year term ends on Oct. 31.
Photo: AFP
She said she would “temporarily relinquish” her responsibilities as IMF managing director during the nomination period.
She would be the first woman to serve as ECB head and the first not to come from a central banking job.
Private economists said that Lagarde’s background as France’s minster of the economy and finance, and her tenure as head of the 189-nation IMF should serve her well in running the ECB, even though her training is as a lawyer and not an economist.
Her selection would mean that the world’s two biggest central banks would be run by lawyers.
US Federal Reserve Chairman Jerome Powell is also a lawyer by training.
“She has done an extraordinary job as head of the IMF,” said Diane Swonk, chief economist at Grant Thornton. “She knows the challenges of the European Union better than most given the role she played in managing the European debt crisis.”
The IMF under Lagarde was called upon to supply emergency loans during the crisis to keep financial troubles in Greece and other nations from unraveling the monetary union.
“At the IMF, she has been pretty vocal about doing what is right for the global economy,” said Sung Won Sohn, economics professor at Loyola Marymount University in Los Angeles. “She has been expressing concerns about slow economic growth around the world and low inflation.”
Under Lagarde’s leadership, the IMF has called for the ECB to continue its monetary stimulus efforts aimed at raising inflation and supporting a recovery that appears to be losing steam.
The IMF’s review of the eurozone last year warned against premature interest rate increases and urged clear forward guidance, that is, promises to keep rates low well into the future.
The report echoed much of what Draghi had been saying, including his urging for governments to do more to support their economies with well-targeted spending and to engage in pro-business reforms.
One of Lagarde’s challenges would be to reconcile inevitable differences in viewpoints on the ECB’s 25-member rate-setting council, especially between indebted southern European nations that tend to support stimulus and northern European officials who are more skeptical of stimulus efforts.
However, in a crisis the president takes center stage, as Draghi showed on July 26, 2012, when he promised to “do whatever it takes” to keep the eurozone from breaking up and then came up with a plan to purchase the bonds of nations facing excessive borrowing costs.
That move calmed market panic surrounding Italy’s ability to manage its debt.
One question is whether Draghi’s successor would have his willingness to be pragmatic and try new policies if the eurozone again runs into trouble.
“With Christine Lagarde, the ECB will get another excellent communicator,” ING Germany chief economist Carsten Brzeski said. “What kind of monetary policies Lagarde really stands for, no one can currently tell. In our view, a continuation of a pragmatic monetary policy stance, as well as a confirmation of ‘whatever it takes’ looks likely.”
A key challenge for Lagarde would be how to add more stimulus if needed, with ECB rates already at record lows.
The ECB in December last year halted nearly four years of bond purchases amounting to 2.6 trillion euros (US$2.93 trillion) as it began to approach the limits on available assets to buy.
Draghi has said there is still “headroom” to buy more bonds if needed.
However, the bigger challenge is that the years of stimulus did not push inflation sustainably to the bank’s goal of just less than 2 percent. It was 1.2 percent last month.
In any case, she would find it difficult to immediately change Draghi’s policy stance. The ECB has promised to keep rates at record lows until the middle of next year.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts