Lagarde wins approval as head of ECB

She’ll take central bank post as European economy faces Brexit, other challenges

The European Parliament approved Christine Lagarde on Tuesday as the next president of the European Central Bank, at a time when the European economy is challenged by Brexit and trade conflicts.

Lagarde received 394 votes in favor and 206 against, with 49 abstentions, in a secret ballot vote on Tuesday after a debate during which members of the European Parliament from both the euro and non-euro states praised and challenged her nomination. Lagarde was not present for the debate or the vote.

The 63-year-old French lawyer and politician will replace Mario Draghi, an Italian economist, on Nov 1 in the Frankfurt-based ECB, which sets interest rate benchmarks and supervises banks for the 19 EU member states that use the euro as a currency.

Lagarde was nominated for the job by the European Council on July 2. She resigned her job as IMF managing director on July 16, a post she had held since 2011.

When the resignation took effect on Sept 12, Lagarde praised the IMF on Twitter as an institution “with a brain, a wallet-and a heart”.

Before the Tuesday plenary vote in Strasbourg, France, Lagarde had appeared before the European Parliament’s Economic and Monetary Affairs Committee in Brussels, where she was grilled on Sept 4 by the members of Parliament. In the committee vote, Lagarde received 37 votes in favor and 11 against, with four abstentions.

In her remarks to the committee, Lagarde said the job requires both a commitment to the basic mandate to keep prices stable and the “agility” to come up with new ways to meet unforeseen trouble.

She will assume the job just a day after the scheduled Brexit on Oct 31. If Britain leaves the EU without a deal, many expect a huge disruption in normal business between Britain and the 27 EU member states.

In addition, the trade war between the United States and China, the EU’s two largest trade partners, is having a heavy impact on EU industries.

The US has also been given the green light by the World Trade Organization to impose billions of euros in punitive tariffs on EU products in retaliation for illegal subsidies granted to Airbus, Politico reported.

Lagarde has also voiced support for such European Central Bank measures as bond purchases and negative interest rates, which have drawn criticism for reducing savers’ returns. She said the measures had helped create 11 million jobs since 2013 and eased financial turmoil.

Without such measures “the crisis would have been a lot worse”, she said, adding that she agrees with the bank’s view that the economy would need monetary support “for an extended period of time”.

Lagarde said she would aim to communicate clearly with the public to explain the bank’s decisions. She said that while “financial market operators” were likely to understand the ECB’s message on monetary issues, “I want the people of the euro area to understand why decisions are being made.”

ECB Governing Council member Yannis Stournaras indicated that Lagarde will probably keep up the controversial, ultra-loose policy in the stimulus package rolled out by Draghi last week, according to Bloomberg.

“There are strong monetary, economic and financial arguments suggesting that (Lagarde) will more or less continue along the same lines,” the Greek central bank governor said in Athens on Monday.

In recent remarks, Lagarde also suggested the ECB should “move towards more green products” and pledged to “continue to look at that and how the ECB can be an actor in this”.

While the amount of carbon assets in the ECB’s portfolio “can’t change overnight”, a “move to a gradual transition to eliminate this type of assets” is something that should be done, she said.

AP contributed to this story.

 

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