European leaders may be about to get the chance to decide on one of the region’s most influential jobs before a possible far-right win in French elections next year. It’s a huge opportunity that also comes with high political risks.Christine Lagarde is considering her future at the European Central Bank, the institution has signaled. The Financial Times reported that she’s already decided to leave early to allow French President Emmanuel Macron and German Chancellor Friedrich Merz find her replacement. Her term is due to run until October 2027.The move appears designed to prevent the French far-right influencing the appointment of Lagarde’s successor if they were to win next year’s presidential vote. But while Marine Le Pen’s National Rally has made clear its desire to upend the way the ECB works, a transparent stitch up to control key appointments and dodge the consequences of elections sets a dangerous precedent for the central bank.“European politicians, like those elsewhere, are tempted to bend the rules to ensure that they have their preferred candidate in charge of the central bank,” said Andrew Kenningham, chief Europe economist at Capital Economics. “This undermines the ECB’s image as one of the world’s most independent central banks.”Among European roles, the ECB job is particularly powerful. The Frankfurt-based institution sets interest rates for 350mn people across 21 countries, monitors for financial risks and aims to ensure the stability of the euro, the world’s second-largest reserve currency.Worries about interference in central bank operations have increased over the past year given developments in the US, where President Donald Trump has repeatedly criticized Federal Reserve Chair Jerome Powell and called on him to cut interest rates dramatically.But moves by European politicians to put up safeguards could backfire.“Ever since the euro crisis, a lot of politicians across the euro area have complained about policy,” David Powell, an economist at Bloomberg Economics, said on Bloomberg Television. “They’ve largely been ignored, they’ve just been a side show, but those voices could become more vocal.”National Rally, led by Le Pen and Jordan Bardella, is polling strongly and could win presidential elections in the spring of next year.Bardella has said the party would push the ECB to restart quantitative easing if it comes to power to help with France’s fiscal problems. But that would breach rules that prohibit the central bank from directly financing governments.Amid such comments, it’s perhaps no surprise that some want to insulate the ECB from interference. The ECB president is chosen among all euro-area member states, though France would have an influential say as the region’s second biggest economy. Two of the four ECB presidents so far have been French — Lagarde and Jean-Claude Trichet.Alexander Kriwoluzky, head of macro economics department at DIW think tank in Berlin, said Lagarde stepping down early “isn’t problematic.”“It would be a proactive decision to create an opportunity to select a suitable successor — someone who will champion the ECB‘s independence — before a president with interests contrary to those of an independent central bank comes to power in France,” he said.Holger Schmieding, chief economist at Berenberg, agreed.“Decisions about top central bank jobs are always highly political,” he said. “The key question is whether, once in office, central bankers can act independently. At the ECB, they can do that even more so than at any other central bank.”Speculation about Lagarde leaving early previously emerged when she was linked to the role of chair of the World Economic Forum.It resurfaced this month after France’s central-bank chief, Francois Villeroy de Galhau, announced he would leave his post prematurely. Like the potential Lagarde situation, that offers Macron the opportunity to replace him before the French election.In a statement Wednesday after the FT story, an ECB spokesperson said Lagarde “has not taken any decision regarding the end of her term.” That appeared less emphatic than Lagarde’s comment last summer that she was “determined to complete” her term.Executive Board member Piero Cipollone said on Thursday that Lagarde’s public statements don’t suggest any intention to leave early.“She’s very committed to pushing forward with the Savings and Investments Union and has announced an important project on repo lines,” he said in Rome. “This doesn’t strike me as the attitude of someone who’s packing her bags.”Bundesbank President Joachim Nagel last week warned of the danger of central banks prioritizing fiscal objectives, pointing to Trump’s attacks on the Fed and warning that any success there could be “a blueprint for politicians in other countries.”“The situation at the Fed is really not one to emulate,” said Spyros Andreopoulos at Thin Ice Macroeconomics. But he also added that it’s “politically risky” as it could make “fine campaign material for the far right.”Indeed, Lagarde’s voice in defending the independence of central banks has been one of the loudest among her peers. She’s warned that institutions become dysfunctional without it, with disruption and instability following from there.Her interventions on the topic have increased with Trump’s attacks on the Fed, and culminated in January, when she was among a group that publicly backed Powell.“The independence of central banks is a cornerstone of price, financial and economic stability,” she said on behalf of the ECB’s Governing Council, in a statement also signed by policymakers across the world. “It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.”However, an early departure could be seen as undercutting those very standards and even circumventing democracy.“If unelected central bankers are seen by the public as trying to choose which elected official picks their replacements, claims of being apolitical may be more difficult to believe,” said Powell.
