Bloomberg Survey of Economists
52% of Respondents Expect Resignation This Year
57% Say Knot Is Best Suited If She Steps Down Early
Expectations are growing that Christine Lagarde, President of the European Central Bank (ECB), will resign before her term ends. If Lagarde steps down early, former Dutch central bank governor Klaas Knot is widely seen as the leading candidate to become the next ECB president.
On the 25th (local time), Bloomberg reported that in a survey of economists conducted from the 20th to the 24th, more than half of respondents said they expect Lagarde to resign within this year.
Regarding the timing of her resignation, 7.4% of respondents pointed to the third quarter of this year, and 44.4% to the fourth quarter of this year. In addition, 7.4% projected she would step down in the first quarter of next year, and 11.1% in the second quarter of next year.
Lagarde’s eight-year term ends in October next year. Only 29.6% of respondents expected her to serve out her full term.
Some 57% of respondents said that, if Lagarde resigns before the end of her term, former governor Knot would be the most suitable person to lead the ECB next. Last October, Lagarde said of Knot, “I have known him for more than six years. He has intelligence, stamina, and strong communication skills.”
However, assuming Lagarde completes her term, 50% of respondents saw former Bank of Spain governor Pablo Hernandez de Cos as the most likely candidate to succeed her.
Recently, the Financial Times (FT) reported, citing sources, that Lagarde is considering stepping down before her term expires. France is heading into a presidential election next April, with the far-right National Rally (RN) enjoying high approval ratings. According to the report, the idea is that Lagarde could leave office before the election so that French President Emmanuel Macron and German Chancellor Friedrich Merz can jointly handpick the next ECB president.
The ECB and Lagarde have denied this report, but questions about the timing of her departure continue to arise in connection with the political situation.
If Lagarde resigns before her term ends, concerns are expected to mount over a loss of the ECB’s independence and credibility. In the survey, 35% of respondents said they worry about a loss of independence in the event of an early departure, while 52% said they are concerned about a loss of credibility.
Modupe Adegbembo, economist at Jefferies, said, “France alone, without broad support, clearly cannot push through a central bank president who is obviously non-mainstream,” but added, “The bigger risk is that this saga could backfire and damage the ECB’s credibility, while delivering very little in terms of tangible outcomes.”
There are, however, practical concerns about Lagarde remaining in office until the end of her term. Holger Schmieding, chief economist at Berenberg, noted that if the RN wins the French election, the process of finding Lagarde’s successor could be delayed. If the ECB presidency remains vacant for an extended period, it could negatively affect markets at a time when risks such as U.S. trade policy uncertainty and the war in Ukraine are already looming.
More than two-thirds of respondents said they could imagine a scenario in which a successor is designated early, before the French election, while Lagarde remains in her post. However, Bloomberg pointed out that in this case Lagarde’s authority could be weakened for the remainder of her term.
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