A fairly damning assessment of Ms Lagarde that does not bode well for the Eurozone.
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A smooth functionary might be fine at the ECB in normal times. Over the next five years, however, the eurozone will certainly face another crisis. The German banking system is teetering on the edge of collapse (the once mighty Deutsche Bank’s share price remains the scariest chart in the world). Bond yields have turned negative, signalling recession. Interest rates are already below zero. A currency war is starting with Donald Trump’s America.
The ECB will have to find new ways of holding a rackety currency together. What is that likely to involve? Some form of helicopter money, as printing cash and giving it away is known, bailing out the German banks without anyone noticing, and allowing Italy to quietly float away with a parallel currency. Draghi’s flexibility and creativity might just have allowed him to navigate all that.
Lagarde will stick to precedent and orthodoxy with lawyerly inflexibility – and that will plunge the zone into a potentially terminal crisis.
The accusation that Christine Lagarde lacks the imagination to lead the ECB is potentially important, in extremis, but the reality is she does not need a great deal of imagination to print more money. That is the conclusion of the market.Click HERE to subscribe to Fuller Treacy Money Back to top