The announcement of the resignation of the President of the European Central Bank (ECB), Christine Lagarde, in February 2027—approximately eight months before the scheduled end of her term—did not come as a bolt from the blue. Her early departure from the ECB’s leadership had essentially been foreshadowed for some time, and the timing of her resignation is directly linked to the presidential elections in France this coming April.
The informal race to succeed her—with the Spaniard Pablo Hernández de Cos and the Dutchman Klaas Knot as the leading candidates—had been underway for months, with the final decision expected before the end of the year, according to German Chancellor Friedrich Merz.
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ECB interest rates: 2.5% in october, 2.75% in december?
The background to her departure and the French elections
Reports that came to light this winter indicated that Lagarde had been offered the position of head of the World Economic Forum (World Economic Forum), also known as the Davos Forum, named after the Swiss resort where the organization’s annual meetings are held in January.
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Subsequent reports stated that Lagarde would resign before the French elections, so that the selection of her successor would not be influenced by the election results in France and the possibility of the far right taking the presidency.
Lagarde herself had denied the possibility of running in the French elections, while in an interview she gave last Thursday, following the ECB meeting, she expressed her desire to have greater freedom to speak out and take a stance on issues beyond monetary policy, as her role as ECB president required her to maintain a neutral stance.
The ECB as an anchor of stability in an environment of uncertainty
In an environment where the European economy is under significant pressure from the wars in the Middle East and Ukraine, as well as from intense competition between the U.S. and China, the ECB’s role as an anchor of stability takes on even greater significance.
The ECB is among the most independent central banks in the world, with its primary mission being to ensure price stability. Under Lagarde’s leadership, it managed to weather the inflationary shock of 2021–2022 and gradually bring inflation back toward its 2% target.
Key Milestones of Lagarde’s Tenure
Christine Lagarde’s tenure as ECB President, which began on November 1, 2019, was marked by successive crises and significant changes in monetary policy. The first woman to lead the eurozone’s central bank was called upon to manage the pandemic, the energy crisis that followed Russia’s invasion of Ukraine, and the biggest surge in inflation in the history of the euro.
The first major test came in March 2020, with the coronavirus pandemic. The ECB launched the Pandemic Emergency Purchase Program (PEPP), which began with a budget of 750 billion euros and was gradually expanded to 1.85 trillion euros. The program helped stabilize financial markets and maintain favorable financing conditions for the euro area economies.
Another important milestone was the ECB’s review of its monetary policy strategy in 2021, with the adoption of a symmetric 2% inflation target, instead of the previous formulation of inflation “below but close to 2%.”
The biggest challenge, however, came in 2022, when soaring energy prices and the turmoil caused by the war in Ukraine drove inflation to historic highs. In July 2022, the ECB raised interest rates for the first time in eleven years, launching the fastest cycle of monetary tightening in its history. From July 2022 to September 2023, key interest rates rose by a total of 450 basis points.
Although the ECB was criticized for delaying the start of interest rate hikes in 2022, tight monetary policy helped inflation gradually ease, allowing the central bank to begin cutting interest rates in June 2024. The easing cycle continued in 2025, with the deposit facility rate falling to 2% in June, as inflation returned to a level close to the ECB’s medium-term target.
Among the key milestones of her tenure was the promotion of the digital euro. Under her leadership, the ECB launched the exploratory phase of the project in 2021 and moved to the preparatory phase in 2023, aiming to strengthen Europe’s strategic autonomy in the payments sector. However, the final decision on the issuance of the digital euro remains pending.
Lagarde took the helm of the ECB without being an economist, but the prevailing view is that she managed to rise to the challenge and secure consensus on the bank’s Governing Council, drawing on her political experience as well.
Her departure thus marks the end of a period during which the ECB had to transition from emergency measures to support the economy to a rapid rise in interest rates and, subsequently, to a gradual easing of monetary policy, with maintaining price stability remaining its top priority.
New Challenges for Lagarde’s Successor
However, the war in Iran has disrupted the trend of easing inflationary pressures, putting eurozone inflation back on an upward trajectory. Although the new wave of price increases is milder than it was four years ago, it remains a significant challenge for the next ECB president.
The new inflationary pressures led the ECB to resume raising interest rates in 2026, with the deposit facility rate set at 2.5% in October. This development highlights the difficulties the central bank’s new leadership will face in its efforts to curb inflation without unduly burdening economic activity.
Added to these challenges is the crisis in the French bond market, which is heightening concerns about the fiscal stability of the eurozone’s second-largest economy.
The two leading contenders for the ECB presidency
Both leading candidates to succeed Lagarde have significant experience in the central banking sector.
Pablo Hernández de Cos is general manager of the Bank for International Settlements (BIS) and previously served as head of the Bank of Spain, while Klaas Knot served as president of the Dutch central bank from 2011 to 2025.
The next ECB president will be called upon to navigate a complex economic and geopolitical environment, while maintaining the central bank’s credibility and independence, at a time when the European economy faces significant challenges.
Source: Proto Thema
