When Christine Lagarde, the long-time head of the International Monetary Fund, shifts to the European Central Bank on Nov. 1, one could see it as a demotion. The ECB has fewer member states, fewer issues where it has an important say and much less glamour. Plus, her new job requires her to move from Washington D.C. to Frankfurt. Why is she doing it?
When she's sitting with her perfect posture in front of you in one of the myriad offices at IMF headquarters -- that beaming smile on her face, the perfectly coiffed hair and permanent vacation tan -- it's a question that seems almost too petty to actually ask.
But she is happy to answer anyway. "First of all," Lagarde says, and her indulgence doesn't seem forced in the least, "I was asked, and there are things that sometimes you don't refuse in life when they ask."
She looks a bit bemused by her own answer, but goes on to say that she is now looking forward to learning German and has already hired a tutor. Furthermore, she has rented an apartment not far from the Botanical Garden and says she has been given a cookbook full of recipes for Frankfurt specialties. And, she says, she even knows what Frankfurt Green Sauce is.
Sometimes when she goes to parties, Lagarde says, she is asked why she's there. Her response is always: "Well, because I was invited."
Did she really just say "party?"
A Defeat in Victory
There is hardly anything that Lagarde isn't able to sugarcoat. A lawyer by training, she is a virtuoso when it comes to thinking positively -- and perhaps that is exactly what Europe's irreconcilable monetary policymakers, the vast majority of whom are men, actually need.
Six weeks ago, outgoing ECB President Mario Draghi pushed through a comprehensive program to further loosen his already loose monetary policy. It was a victory that was, in reality, a defeat. More than a third of Governing Council members were opposed to his plan, including not just German central bank head Jens Weidmann, who is well-known for his frequent resistance to Draghi's policy, but also the relevant expert panels and the French ECB representative, who had always been seen as a loyal Draghi ally.
Since then, a battle has been raging within the glass towers of the European Central Bank. Critics accuse the ECB head of having tied the currency to a poorly substantiated policy for years to come. Draghi's people, meanwhile, rail against the Bundesbank, Germany's central bank, saying it is ideologically stubborn and infused with nostalgia for the deutsche mark. In the German government, meanwhile, there are those who scoff at Draghi's "Atlas syndrome," saying that he seems to believe he is able to save the world.
The atmosphere inside Draghi's agency has become deadlocked, with the newspapers writing of "days of chaos" at the ECB. Former central bankers have taken to issuing written statements either in support of or opposition to Draghi. The German ECB Executive Board member, Sabine Lautenschläger, resigned in a huff in late September. And the German tabloid Bild, a paper with a sure nose for bad taste, reviled the ECB president as "Count Draghila" who is "sucking dry" the accounts of German savers.
'My Own Style'
Europe's common currency headquarters is more divided these days than it has ever been, making it no wonder that the future boss is also sending a variety of different signals at the moment. On the one hand, she insists that she intends to stay true to the current course. On the other, though, she has announced a number of changes that could add up to a cultural revolution at ECB headquarters. Lagarde's overarching goal is improving communication both within the central bank and with the world outside. She is also planning on expanding the range of issues addressed by the bank to include the promotion of women as well as climate policy. And she has suggested that she intends to conduct a fundamental examination of all monetary policy instruments in which there will be no taboos. "President Draghi had his own style," she says. "I will have my own style."
All of which raises the question: Is she really on the search for a new consensus on European monetary policy? Or does she just want to improve communication when it comes to the controversial course charted by Draghi?
When she became the first woman chosen to lead the International Monetary Fund in 2011, a rather harmless photo, showing her doing yoga in her Georgetown apartment, triggered a mini scandal just a few weeks after she started. In the picture, she was standing before floor-to-ceiling windows in a beige sweater and jeans, which she rarely wears, with a bouquet of yellow roses on a table next to her. Lagarde's arms were stretched up to the ceiling in the Tadasana, or Mountain Pose. The photo was taken for the French gossip magazine Paris Match, and the accompanying article noted that she did yoga for 20 minutes a day to relax. And she said in the piece that her attitude was "Zen."
It wasn't exactly the kind of humor that the IMF was used to. It is an institution that sees itself as a bastion of economic excellence, employing the world's best economists, who in no way view the term aloof as an affront. As such, Lagarde's excursion into the yellow press raised some bushy, gray eyebrows. Was the IMF suddenly joining forces with the tabloids?
"I am a bit anti-cyclical," Lagarde said at the time when asked about the new style she brought to the institution. "A figure of contrast. A lawyer in a world of economists, a French woman in America. The result is that people tend to underestimate you."
She served as chairwoman of the IMF for eight years and was quite successful. Her career before that included a five-year tenure as the first woman president of the international legal firm Baker & McKenzie, then two years as French trade minister, one month as agricultural minister and four years as finance minister. And still, there are voices out there that doubt if she has the necessary clout for her new position. "It is worthy of note that a lawyer can become head of the central bank, whereas nobody would ever think that an economist could lead a high court," says Isabel Schnabel, who will be taking Lautenschläger's spot on the ECB Executive Board.
Not Afraid of Change
Lagarde merely responded that being underestimated is a source of motivation.
When asked about the task facing her and about the discord inside the ECB, she proffers a reminder of how large the task seemed when she took over leadership of the IMF eight years ago. She insists she isn't trying to downplay the challenges ahead of her, but points out that the IMF, with its 189 member states, isn't a particularly straightforward institution either. Furthermore, she took over the reins from Dominique Strauss-Kahn, who had stumbled over allegations of attempted rape, making him the third IMF head in succession to fail to complete a full term. Criminal proceedings against Strauss-Kahn were later abandoned.
It should also be remembered that Lagarde isn't exactly afraid of change. At the IMF, she transformed the communications department into the institution's most important power center. The various departments, which had until then operated largely independent of each other as mini fiefdoms, were consolidated and reined in. And from that point on, the communications department didn't just decide how something was to be publicized, but what was to be publicized. Over the years, IMF Spokesman Gerry Rice became her most important confidant, say insiders.
Will she do the same thing again at ECB? "In those similar situations, I have tried to identify: What is the common ground?" she says. "What brings people together? What do they all believe in? And not to focus too much on differences or individual agendas."
She also already has her eyes on the appropriate instrument for doing so: A review of all monetary policy measures, which she intends to begin immediately after taking office. "I want to go along that path with the members of the Governing Council and in good collaboration with members of staff as well. I think it should start very early on and move at a steady pace."
How good Lagarde is at solving conflicts can be seen in her relationship with Wolfgang Schäuble, who she knows well from the time when they both led the finance portfolios of their respective countries. Normally, Schäuble allows nobody to push him in his wheelchair, but he makes an exception for Lagarde, who is permitted to push him around in public.
A Jar of Honey
Usually, that permission serves to indicate the kind of personal privileges that Schäuble grants his French colleague. But Lagarde says there is more to it than that. On one occasion, she explains, Schäuble used the privilege to heroically help her out of a potentially embarrassing situation. She had fallen and scraped her knee, causing blood to get on her pants, she relates, and because she saw no other possibility for hiding the stain, she asked Schäuble if he might allow her to push him -- and he agreed.
When asked today about his conflicts with Lagarde over the Greek debt crisis, on debt policy and on numerous other issues where they were so far apart, he says: "I never had large differences of opinion with her. Lagarde combines French elegance with American toughness. We are both lawyers and we were consistently able to reach agreement on that level."
It is impossible to get him to say even a single negative thing about Lagarde. On one occasion, she flew to Berlin for the sole purpose of holding a speech for his 70th birthday party. When he was in the hospital, she sent flowers. When he once came down with a cold, she sent him a jar of honey from her own hive.
When Lagarde seeks to win someone over, she doesn't hold back. And she can do so without necessarily putting herself in the spotlight, preferring to make others look good to ensure that she gets what she wants. When Donald Trump was elected president of the United States, a man who stands in almost complete contrast to the international spirit of the IMF, she took advantage of a chance encounter with Ivanka Trump in the halls of the White House for a bit of flattery. Maybe they should find a time to meet up, she told the president's daughter, since they only knew each other from television. A short time later, she appeared at the Women's Summit in Berlin with Ivanka Trump and Angela Merkel.
One of Lagarde's tried and true methods is to ensure a positive climate. Another is to involve her experts. At the IMF, she consistently listened to the advice given to her by senior economists. In exchange, she expects the experts to be flexible enough to be responsive to her needs -- she wants them to not just voice their concerns, but also to present possible solutions.
A Tough Spot
When asked a couple of years ago what piece of advice she would give someone who suddenly found themselves at the helm of an organization like the IMF, Lagarde answered with the story of Einstein's driver. The two of them swapped roles on one occasion, with the driver holding Einstein's presentation while the physicist himself sat in the audience. When a particularly challenging question was asked, the driver said: Please ask that man in the audience. That, Lagarde says, is also her philosophy -- namely that you always need your own personal Einstein to help you out of a tough spot.
The ECB's chief economist is Philip Lane. He is a native of Ireland, which is advantageous since Lagarde, as she herself says, has always got along excellently with the Irish throughout her career. But Lane is also a confidant of Draghi's, with both belonging to the same school of economics and both considered "doves" when it comes to monetary policy, meaning they would rather pump too much liquidity into the economy than too little. "Our monetary policy works," he says from behind his shiny, white conference table with the Frankfurt skyline in the background. For a long time, "everything had been going in the right direction." Loans, growth, employment, inflation: Everything improved after the ECB dropped interest rates and, starting in the middle of this decade, began spending hundreds of billions of euros on sovereign bonds.
The good times would likely have continued, he says, if the U.S. hadn't launched a trade war with China and the British hadn't voted in favor of Brexit. Now, we are unfortunately facing "a phase of slower growth," says Lane, going on to insist that it shouldn't be mistaken for a recession. "I don't currently see the end of the positive developments, just an interruption."
The only question about that is: If the situation isn't that bad, why did the ECB have to pass such a massive program in September? Why didn't the bank simply drop interest rates, as the Bundesbank wanted, instead of opting to announce the indefinite continuation of sovereign bond purchases until the inflation rate is again at 2 percent? Was that really necessary?
Lane believes it was, though he says: The situation could change if the trade conflict were to relax and financially strong countries like Germany were to stimulate their economies. That would lead to "monetary policy instruments functioning more rapidly." And that, in turn, would mean they could be abandoned more quickly. "When the facts change," as British economist John Maynard Keynes allegedly once said, "I change my mind."
Lane's future boss holds a similar view. "Monetary policy has done an awful lot in the last few years," Lagarde believes. "It cannot be the only game in town. It has to be a policy mix." Higher state spending in some countries, more reforms in others, all underpinned by ECB monetary policy. "For policies to actually work efficiently, it has to be accompanied by other arms of that policy mix."
Lagarde has never felt limited by the strict boundaries of whatever position she has held. In her eight years at the IMF, she successively broadened the institution's traditional mandate, with its strict focus on problems pertaining to debt and balance of payments. Lagarde opened the IMF up to issues that had previously been largely disregarded by institution economists, such as female participation in the labor market.
She saw it as an opportunity to make the IMF -- which to that point had widely been seen as a kind of all-powerful debt and savings police -- seem more sympathetic, more approachable and more human. It is a model that she can imagine applying to the ECB, which is currently the focus of extreme ire from savers.
"My personal view is that the euro, the ECB and monetary policy have to be communicated to a broader audience," she says. "There aren't that many women in finance, when you look at numbers, so certainly trying to encourage them and to encourage young women to go into finance. I will see how I can do that. And I'm also very keen to explore ... how the ECB can be an active participant in the fight against climate change."
The fight to increase women's participation in the labor market is particularly personal for Lagarde, after she was told at the beginning of her career in France that as a woman, she could never be the head of a large legal firm. She did all she could to prove to the world that it was possible.
"When I look around at my circle," Lagarde says, "the table that I will sit at will be populated with a lot of gentlemen. In any function and in any position that I've had in my life, I have found ways to support women and to encourage women."
Still, Christine Lagarde is far from being a revolutionary. For that, she enjoys the role of the Grand Dame far too much.
The article you are reading originally appeared in German in issue 44/2019 (October 26th, 2019) of DER SPIEGEL.
When Lagarde was 17, she wrote an essay with the title "Noblesse Oblige," in which she related an anecdote of her mother telling her and her three brothers: "You are now old enough to understand what I have to tell you. I am an aristocrat, a countess, which means you will be a countess- and counts-in-waiting as soon as you turn 18. And when I die one day, you will become countess and count."
A Full Plate
Her mother was a teacher and was convinced that she had aristocratic roots. She taught her daughter good manners and to speak French without a regional accent. And she hated the fact that her daughter wore jeans.
Today, Christine Lagarde is 63, and her rings, necklaces, brooches and scarves, her ladylike elegance, have become something of her trademark. It is one that garners her respect from all sides, from young women and successful men in equal measure.
For Wolfgang Schäuble, the euro is one of his political legacies. He was floor leader for the conservatives in German parliament when the currency union was negotiated in the 1990s. Later, as German finance minister during the euro crisis and the Greek debt crisis, he supported Draghi's famous policy of "whatever it takes." Since then, though, he has followed Draghi's ECB policies with unease, even calling it a promotional program for the AfD, as Germany's right-wing populist party is known. Now, he says, "a normalization of monetary policy is necessary." The path to that goal is "difficult, of course," but it "must be embarked upon."
His hopes are completely on Lagarde's shoulders. Schäuble is fully aware of the deep rifts in the Governing Council, the north-south divide in Europe and the propaganda advantages enjoyed by the right-wing populists as a result of the low interest rate.
He doesn't want to give the new ECB president any advice, knowing full well that it would be unwelcome. Instead, he is placing his faith in her experience, her ideas and her social intelligence, which has helped her solve many previous conflicts in her career. "I am extremely confident," says Schäuble, "that she can lead the ECB out of a difficult situation."
In just a few days, Lagarde will be starting her new job. And she plans to start her German lessons on the same day. She has a lot on her plate.
"One day," she says, "maybe I will be able to explain negative interest rates in German."