ECB: Political succession risks and policy outlook – Rabobank

Rabobank’s Bas van Geffen analyses reports that President Lagarde may leave the ECB early, arguing this is not required to safeguard ECB independence but could help France retain influence on the Executive Board. The bank expects Germany and France to keep board seats but not the presidency, and stresses that successors to Lane and Schnabel may matter more for ECB policy beyond 2027.

Lagarde exit talk and board reshuffle

"Reports that Lagarde might quit early have cast a new spotlight on the succession plans at the ECB. We don’t believe that President Lagarde needs to quit in order to safeguard ECB independence, but ensuring that France keeps a seat on the board may be another motive. The chances of a “package deal” for all three upcoming ECB vacancies are increasing."

"We think Germany and France will claim two of these, but not the presidency. For future ECB policy, the replacements of Lane and Schnabel are possibly more relevant than Lagarde’s successor."

"Reportedly, Lagarde may quit before the French presidential elections in April 2027, given the prospect of a possible populist victory. The reasoning is that this would give President Macron the opportunity to appoint her successor in agreement with his European peers."

"We believe it is unlikely that France gets to nominate the next president, but recall that Lagarde’s job is not the only vacancy at the ECB that needs to be filled next year. Philip Lane’s term ends in May 2027, and Isabel Schnabel can only stay on until the end of that year."

"And secondly, the departure and replacements of Lane and Schnabel are possibly more relevant for ECB policy in 2027 and beyond. They currently hold the key portfolios, Economics and Market Operations, which are instrumental for the decision making in the Governing Council."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)