The Zhitong Finance App learned that ECB President Christine Lagarde announced that she will step down in early 2027, and the battle for a successor heats up. The ECB issued a statement on Thursday saying Lagarde will step down on February 7, 2027. She succeeded Mario Draghi as ECB president in 2019, becoming the fourth president of the agency and the second governor from France. His term of office was originally scheduled to end in October 2027.
In a video address, Lagarde said, “When I left this institution, I felt that I had done an excellent job and that the ECB was ready for the future.”
European Council President Antonio Costa said that the process to find a successor to ECB President Lagarde will begin on Thursday. “To ensure the ECB's smooth transition to the next leader, the process of appointing a successor will commence today and will be carried out without delay so that the European Council can make a timely decision,” he said in a statement on Thursday.
German treasury bonds and other Eurozone bonds maintained a slight increase after the news was announced. The yield on 10-year German treasury bonds remained flat at 3.36%, 1 basis point lower than the previous day; the spread of French treasury bonds to German treasury bonds stabilized at 154 basis points.
Lagarde's departure will open one of Europe's most important leadership contests. His successor will be responsible for setting interest rate policies for the Eurozone's 21 member states and more than 350 million people.
European Council President Antonio Costa said in a statement: “To ensure a smooth transition to the next ECB leadership, the succession selection process will begin today and proceed immediately, with a view to the European Council making a timely decision.”
Succession competition: Decos leads the way, but the advantages are not huge
Spain's Pablo Hernandez de Cos (Pablo Hernandez de Cos) and the Netherlands's Klaas Knot (Klaas Knot) are competing for Lagarde's position.
According to a survey conducted in October, Decos, the former governor of the Bank of Spain and the current president of the Bank for International Settlements, is a popular candidate. The 12 economists interviewed were optimistic about Decos and 9 supported Nott, indicating that although Decos is in a leading position, the gap between the two is not huge.
Rumors about Lagarde's upcoming departure are already raging. She has repeatedly declined to promise to complete her eight-year term. Meanwhile, it is widely rumored that she is interested in taking over the World Economic Forum, the organizer of the annual Davos Forum.
Ralde also said that she may hope to play a part in the French presidential election campaign next spring, but clearly ruled out the possibility of running for the top position. These vague statements have made ECB colleagues unhappy, and some are worried that this does not bode well for one of Europe's most important economic institutions.
High level blood exchange in complex situations
In a memorandum to employees, Lagarde said, “Throughout history, the ECB has successfully completed leadership transitions while carrying out its mission. This time was no exception. I am confident that the ECB will continue to serve Europe with the same dedication for some time to come.”
At the time of this announcement, the US and Iran have yet to reach a lasting peace agreement. The ECB has raised interest rates in June and September, and the market expects further tightening of the policy.
Meanwhile, global bond yields have soared, and investors are particularly nervous about France's public finances. The premium required for investors to hold French 10-year treasury bonds over German treasury bonds recently hit the highest level since 2011, triggering speculation that the ECB might intervene.
Lagarde said predictions suggest that inflation will return to target levels around the end of 2027, but critics will accuse her of breaking her promise to “not give up her position when the outlook is uncertain.”
Prior to Lagarde, Wim Duissenberg of the Netherlands was the only ECB president who did not complete his full term. However, his early departure was agreed in advance to resolve the impasse between France and Germany before the establishment of the ECB in 1998.
European leaders will hold summits in November and December to try to select a successor. In addition to popular candidates, dark horses cannot be ruled out; Lagarde himself only came into view at the last minute.
Governments must also choose a successor for ECB Executive Board member Isabelle Schnabel. She will end her term a year early and join the International Monetary Fund in early 2027. As chief economist Philip Lane's term also expires in May next year, governments may seek a package deal on these three positions.
Lagarde's early departure may trigger accusations of political interference with the ECB's independence, as the schedule allows French President Emmanuel Macron to participate in promoting succession arrangements before the end of his term. Polls show that the far-right candidate Marina Le Pen may win the first round of elections at the Elysée Palace.
The governor of the Bank of France also resigned early, and Macron appointed his chief of staff Emmanuel Moulin to this position.