Christine Lagarde resigns as IMF chief, cites more clarity for nomination as European Central Bank president

Washington: International Monetary Fund chief Christine Lagarde announced on Tuesday she had submitted her resignation from the global lender, saying she had more clarity about her nomination to be the next head of the European Central Bank.

Lagarde said in a statement her resignation was effective 12 September, opening the way for the IMF to launch the search for her successor, which is likely to be another European.

“With greater clarity now on the process for my nomination as ECB President and the time it will take, I have made this decision in the best interest of the Fund,” Lagarde said in a statement.

She said her resignation would expedite the selection for the next head of the IMF.

Lagarde’s resignation comes two weeks after her nomination on 2 July for the ECB’s top job. She did not immediately resign from the IMF because of uncertainty over whether the new European Parliament would support her and other new EU leadership positions, sources told Reuters.

While a vote from the European Parliament is needed, its outcome is not binding, and Lagarde’s appointment will be finalized by EU leaders at a regular summit on 17-18 October.

International Monetary Fund Managing Director Christine Lagarde. Reuters

Lagarde’s decision to resign comes on the eve of a meeting of the Group of Seven finance ministers in Chantilly, France.

US Treasury Secretary Steven Mnuchin is slated to meet with Bank of England Governor Mark Carney—one of the leading candidates to replace Lagarde—on Wednesday evening on the sidelines of the meeting.

White House economic adviser Larry Kudlow last week declined to comment when asked about Carney as a possible replacement for Lagarde.

Other names being floated include Bank of Finland Governor Olli Rehn, as well as Germany’s Bundesbank President Jens Weidmann, and ECB executive board member Benoit Coeure.

Kristalina Georgieva, a Bulgarian national who is currently chief executive officer of the World Bank, has been seen as having an outside chance, according to IMF sources.

A former French finance minister, Lagarde was the first woman to head the IMF and was known among policymakers as a tough negotiator. She was a tireless advocate for the benefits of trade, global growth that aids the poor and middle classes, and the empowerment of women.

Her second five-year term as head of the IMF was not due to end until July 2021. Traditionally, the post has always been held by a European, while the head of the IMF’s sister organization, the World Bank, has always been an American since the institutions were created at the end of World War Two.

If approved, Lagarde would take over as ECB president from Mario Draghi on 31 October. While her confirmation could be lengthy, it is likely to be largely a formality as long as the euro zone’s biggest member states—Germany, France and Italy—are in unity.

Her immediate challenge at the ECB would be to overcome her shortcomings in monetary policy-making, especially as it seeks to rearm for a potential new slump after years of using unconventional policy tools to stimulate inflation and growth.