Will Lagarde leave ECB for a new, lucrative role at the WEF?

Christine Lagarde has just made headlines, and this time, she did not need to make any public appearance or discuss monetary policy. The European Central Bank (ECB) President could be leaving her position earlier than expected, according to World Economic Forum (WEF) founder and former chair Klaus Schwab. 

The unexpected news of a potential departure from Lagarde surprised ECB observers, who largely assumed that Lagarde would stay until the end of her term.

Schwab said he and Lagarde have been discussing the possibility of the current ECB chief becoming the new WEF boss “for several years,” he told the Financial Times (FT) in an exclusive interview on Wednesday. That would clash with Lagarde’s current mandate at the ECB, which expires in October 2027.

Leadership turmoil at the World Economic Forum

Klaus Schwab founded the WEF in 1971, which was initially known as European Management Forum and was renamed as the World Economic Forum in 1987. He chaired the organization since its foundation until last month, when he was forced to resign after a whistleblower made allegations that Schwab and his family had received inappropriate benefits from the organization, according to the FT.

Former Nestlé boss Peter Brabeck-Letmathe was appointed as the interim chair on April 21, and the WEF board formally started a selection process to find a new chairman through a search committee, per their own press release.

Schwab’s earlier departure might have not only damaged his reputation at the front of the WEF but also his plans to pick his successor. Schwab told the FT that Lagarde’s potential transition could be jeopardized: “My fear is that if this continues and hangs over the organisation without a solution, Christine Lagarde will not take up the position as chair,” he told the FT. “I don’t want to lose her. I want to make sure what has been built here is not destroyed.”
Lagarde already holds a position in the WEF as a member of its Board of Trustees.

Is Lagarde leaving the ECB earlier than expected?

When asked about the report, an ECB spokesman denied the possibility of Lagarde’s early exit to Reuters, saying that Lagarde “has always been fully committed to deliver on her mission and is determined to complete her term.” 

The WEF did not comment on the information, explaining that “they are not in a position to discuss confidential discussions that may have taken place between Schwab and Lagarde,” they also told Reuters.

Several sources close to the Geneva-based organization told the Financial Times that any formal agreement had been reached between Lagarde and the WEF.

Nonetheless, the Financial Times report cited sources familiar with the matter that confirmed such talks did occur and continued even after Schwab’s departure from the WEF. 

According to Schwab, they even discussed Lagarde’s potential transition from Frankfurt to Geneva, where the WEF is headquartered. Lagarde would live in a WEF-owned complex, Villa Mundi, where an apartment overlooking Lake Geneva would have already been reserved. Her salary (last year she made 466,000€ at the ECB) in this new position could almost double, per the same report.

When would Lagarde leave the ECB?

Klaus Schwab said that he and Lagarde had just discussed the plan in early April, right before his sudden departure from the organization. 

“I visited her to discuss the leadership transition [at WEF] with myself remaining chair until she was ready to take over, at the latest, early 2027,” he said. Such a timeline would clash with Lagarde’s last months as ECB President. 

The FT cited a source close to Lagarde who mentioned she would not be ready to leave the ECB until fulfilling her duty to return inflation close to 2%, as it is her mandate at the European Central Bank. The Eurozone’s last two inflation measurements for March and April came at 2.2%, and price growth has been below 3% since October 2023.

But even with that tick checked, Lagarde still expressed lingering doubts about her early departure from the Frankfurt-based institution, per the same FT report. She had already been linked to a potential WEF move before being appointed as the head of the ECB, according to a Politico report. Lagarde’s term as the ECB President is non-renewable.

Christine Lagarde’s career has seen her take on several powerful roles in both the public and private spheres. Lagarde served in three different French ministries between 2005 and 2011 during Jacques Chirac and Nicolas Sarkozy’s presidencies. Then, she moved to New York to become the International Monetary Fund (IMF) President, a role she occupied for eight years until she was appointed to the ECB.

Who could replace Lagarde as the ECB President?

The process of choosing an ECB President is a complex one that requires following a delicate equilibrium of powers within the European Union (EU) institutions. Formally, ECB chiefs are appointed by the European Council by a qualified majority, but a vote is also held in the European Parliament, and if a candidate is rejected there, a new candidate must be proposed.

This checks and balances system is designed to distribute Europe’s major leadership roles between different countries and political sensibilities. Since a German citizen already holds the European Commission presidency through Ursula von der Leyen, it is highly unlikely that another German would be appointed to the ECB presidency once Lagarde departs.

Anyway, like on a football transfer window, once a major central banker role is rumored to be open, speculation and rumors take over. 

One of the top candidates for the role could be Klaas Knot, the current president of the National Bank of the Netherlands. Knot would be the frontrunner to the role when Lagarde leaves the ECB, according to the German financial news site Börsen Zeitung. 

Knot has moderated his monetary policy views recently, from a perceived hawkish stance to a more neutral one, Commerzbank economist Marco Wagner, told the same outlet, which could help him secure the spot at the ECB’s helm when the time comes. 

“There is absolutely no doubt that Knot is professionally qualified for the ECB president position”, ING chief economist Carsten Brzeski, told the same outlet.

Even as the ECB quickly dismissed speculation over Lagarde’s future, the betting pool has been opened: Who will be the next ECB chief?