Is leadership at the European Central Bank (ECB) going from the imperious to the imperial? In one of her first acts as president of the ECB, Christine Lagarde, last week, took the other 24 members of the bank’s Governing Council to an offsite at a German five-star hotel housed in a 19th-century castle built by the empress, Victoria.
The goal, according to numerous media reports, was to discuss how best to repair relations between the council and the president after the governors of the eurozone's national central banks had grown frustrated with Mario Draghi’s tendency to take decisions on advice of his kitchen cabinet and present them as a fait accompli in monetary policy.
This was especially the case in the final decisions of the outgoing president to lower the benchmark interest rate a notch further into negative territory and to re-launch the asset purchase program at €20 billion a month for an indefinite period. As many as a third of the council members opposed this latter move, according to press reports.
As such, one of the first things Lagarde needed to discuss was whether to make votes in such cases mandatory, which apparently they have not been, even though the ECB has an elaborate schedule of who is entitled to vote in any given month. However, it hasn’t yet emerged from the offsite meeting whether voting procedures were discussed. The ECB’s once-a-month summary of non-monetary policy decisions released this past Friday makes no mention of it.
Lagarde is due to deliver her first speech as ECB president this coming Friday, so it will be interesting to see if she mentions this discussion or sticks with high-minded themes like the need for fiscal policy to support monetary policy.
Lagarde certainly had time to become accustomed to the high life of international finance during her eight years as managing director of the International Monetary Fund. Though the euroskeptic British newspaper, the Telegraph, described the ECB offsite as lavish, the dinner and stay at the Schlosshotel Kronberg would hardly rank as the pinnacle of luxury for Lagarde, or indeed any of the central bank governors.
The offsite last week was a first of sorts for the ECB, a relatively young institution whose earlier presidents have not been of the mindset to entertain the governing council in this manner. Lagarde, however, tweeted a photo of the council members around a large table in a brocaded hall with the note that they discussed in an informal setting how to run the governing council.
The number of other members of the governing council coincides exactly with the two dozen executive directors Lagarde had to deal with at the IMF, so she no doubt felt comfortable with the group. The fact that she was the only woman present drew sarcastic remarks on Twitter about gender balance, but was not likely to have disturbed Lagarde, who is used to working in a world of men. (Only three of the IMF’s current executive directors are women.)
It seems unlikely that council members like Bundesbank president Jens Weidmann, who vociferously objected to Draghi’s easy money policies, could be bought off as cheaply as a night at a spa hotel in the Taunus, but it may be that Lagarde’s change in style will actually have an impact on the substance of ECB discussions. Friday’s debut speech from the new ECB president will hopefully offer some clues.