FRANKFURT (Reuters) – Christine Lagarde will ensure European Central Bank policymakers climb down from their “ivory tower” and face the political realities of the euro zone, the ECB’s vice president, Luis de Guindos, said in an interview published on Saturday.
FILE PHOTO: European Central Bank (ECB) Vice-President Luis de Guindos attends a news conference on the outcome of the meeting of the Governing Council, in Frankfurt, Germany, September 12, 2019. REUTERS/Ralph Orlowski/File Photo
Lagarde, a former finance minister of France and head of the International Monetary Fund, will replace Mario Draghi at the helm of the ECB on Nov. 1.
She is set to become the first ECB president with no formal training in economics.
“Central bankers have sometimes been working in an ivory tower,” de Guindos, a former Spanish finance minister, told Spanish daily El Pais.
“Christine Lagarde – not to mention myself – is well versed in the euro area’s mechanisms. The ECB’s decision-makers need to understand the context, make sound choices from among the alternatives and communicate appropriately,” he added in the interview conducted on Oct. 11.
The ECB has been trying – and largely failing – to get euro zone governments that run budget surpluses, such as those of Germany and the Netherlands, to loosen their purse strings and support economic growth.
De Guindos defended the ECB’s aggressive stimulus measures, which saw it push its deposit rate further below zero last month and resume a bond-buying program that already totaled 2.6 trillion euro despite opposition from several policymakers.
But he reaffirmed the side effects of those policies were becoming increasingly apparent and inflation was being kept below the ECB’s target of just under 2% by forces outside of its control.
“Inflation has indeed been below the objective for some time, but behind this there are structural changes for which we don’t yet have a full explanation,” he said.
The euro’s exchange rate and some market-based interest rates have risen since the ECB unveiled its latest package as a public revolt among policymakers against more money-printing was seen capping the scope for further easing.
De Guindos said the public divisions “were not contributing to the effectiveness of the policies” and called for all rate-setters to back decisions once they are taken.
Reporting by Francesco Canepa; Editing by Alison Williams