Draghi & Lagarde
Political leaders from across Europe including French President Emmanuel Macron, German Chancellor Angela Merkel and Italian head of state Sergio Mattarella yesterday lined up to thank and congratulate outgoing ECB chief Mario Draghi on his eight years behind the wheel of the central bank.
Draghi passed over the baton to former IMF chief Christine Lagarde at a ceremony in Frankfurt where praise was heaped upon the Italian economist.
In her speech, Angela Merkel recalled "when markets were actually betting on the collapse of the euro," adding that Mario Draghi's leadership had made "the eurozone - despite all the problems at hand - much stronger than it was during the area's massive sovereign debt crisis."
Emmanuel Macron spoke of his admiration for Draghi's ability to "talk about and believe in the irreversibility of the euro currency in the face of markets that seemed no longer controllable during the financial crisis," and praised his efforts to arrive at a genuine banking union.
Italian President Sergio Mattarella described Draghi as "a man with and extraordinary commitment to serve Europe."
"He led a central bank that in times of crises was not rigidly bound to old mechanisms, but reacted creatively to emergency situations."
Away from all the back slapping, Draghi will be remembered as a polarising figure. During his tenure, he fought against fears of deflation and sluggish growth in the eurozone through use of near-zero and negative interest rates and a large asset purchasing scheme. For the first time in history, the ECB saw markets flooded with large amounts of cheap money.
Many ordinary citizens felt the pinch as a consequence of Draghi's policy, finding it difficult to secure a decent yield on savings. In Germany, the Bild newspaper dubbed the 72-year-old economist "Count Draghila", accusing his of sucking German savings accounts dry.
Draghi himself appears to remain unfazed by such criticism. As recently as last Thurday, at his final ECB Governing Council meeting, he defended his move to launch a fresh set of stimuli in the eurozone, further cutting a key interest rate and opening the door to another set of cheap credits to banks.
The ECB had also relaunched corporate and government bond purchases worth €20-billion per month, causing significant public criticism even from within the ECB, with some there saying the move was "too drastic."
Many experts are saying that when Christine Lagarde officially takes over the role on Friday, her biggest priority will be to bridge the gap between ECB governors created by Draghi's policy legacy.
ING Chief Economist Carsten Brzeski told AFP that she should "have the two sides talk to each other," before adding; "This also means that there won't be any imminent changes to monetary policy."
Many are anticipating that Lagarde will call on governments to use the methods available to them to help boost the eurozone economy, in particular by increasing spending on infrastructure.
"Monetary policy has done a lot in recent years," Lagarde told Der Spiegel. "Finance and economic policy must complement it now."
63-year-old Lagarde is herself not an economist, and will have to rely on the technical expertise of other council members. What she is, however, is a very well connected politician, who guided the IMF through the aftermath of the financial crisis.
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