ALEX BRUMMER: Celebrity bankers like Christine Lagarde undermine their authority

  • ECB president Lagarde has politicised one of the most critical global institutions
  • Central bankers, IMF and other officials have become mesmerised by publicity 
  • They have gone beyond their mission by critiquing individual countries

Beyond her remit: Christine Lagarde

Beyond her remit: Christine Lagarde

Celebrity culture is a mainstay for the media but also a curse of our time. It encourages rock stars, actors and football commentators to pronounce on current affairs as if they are in possession of amazing insight.

This matters because of the ability of such stars to influence opinion through their online presence.

Far more serious, however, is the insidious way in which stardom has penetrated some of the world’s most discreet institutions such as central banks and the International Monetary Fund.

At a recent private gathering, a senior financial figure was scathing about how celebrity central banking and its ilk is undermining the concept of public service and the credibility of decision making.

The prime example cited is the way in which European Central Bank president Christine Lagarde has politicised one of the most critical global institutions.

Speaking to French TV last month, Lagarde argued that the potential return of Donald Trump as US president was ‘clearly a threat to Europe’.

Trump would place Europe at odds with the US on protectionism, military support for Nato and climate change. As true as that might be, Lagarde’s public intervention was way outside what is expected from central bankers. 

The Frankfurt-based ECB may be celebrating its first quarter of a century next year, but her remarks would have her predecessors at the old Bundesbank in high dudgeon. As apostles of the soundness of money, any diversion from the core job of maintaining the deutschmark – now the euro – would be verboten.

Indeed, it is hard to think that any Lagarde predecessor would have allowed themselves to be dragged into the weeds of American politics. Mario Draghi, as president of the ECB, had only one thought on his mind during the crisis in the eurozone in 2010-12. He memorably declared that within the mandate of the ECB, the institution ‘is ready to do whatever it takes’.

Lagarde, who once served as France’s finance minister, is not alone in distorting values of independence, focus and an air of mystique once favoured by central bankers.

When George Osborne signed up Mark Carney as governor of the Bank of England to replace Mervyn King in 2012, displacing favoured internal candidate Paul Tucker, it was precisely because of his celebrity.

Carney, as governor of the Bank of Canada and chairman of the post-banking crisis Financial Stability Board, had stardust.

But he couldn’t resist political drift. His intervention in the Scottish referendum debate of 2014 was welcomed in Westminster because it underpinned arguments for rejection. His later tacit support for staying in the EU at the time of the referendum in 2016 was seen by Brexiteers as betrayal.

Carney’s support for climate change policies is a worthy cause. But it diverted the attention of the Bank of England from the core functions of meeting the inflation target and maintaining financial stability.

When in 2023 he popped up on video at the Labour Party conference to endorse Rachel Reeves as the next Chancellor of the Exchequer, it compromised the political neutrality for which central banking is renowned. The work of the International Monetary Fund inevitably is politically sensitive. The Fund could not be involved in Sri Lanka, Argentina or other troubled nations without attention to local politics. As managing directors of the IMF, first Lagarde and more recently Kristalina Georgieva demonstrated a startling willingness to interfere in Britain’s politics.

Lagarde’s May 2016 warning shot at the Treasury that Brexit would be ‘pretty bad, to very, very bad’ went well beyond the convention that the IMF does not stick its nose into the domestic politics of G7 shareholders.

Georgieva strayed in September 2022 when she publicly urged the UK to ‘re-evaluate’ the unfunded Kwasi Kwarteng/Liz Truss tax cut package, pouring petrol onto a fire raging on financial markets. Matters did not improve this year when the IMF’s chief economist, Pierre-Olivier Gourinchas, cautioned Chancellor Jeremy Hunt against tax cuts in his March 6 budget.

Central bankers, the IMF and other officials have become mesmerised by publicity and gone beyond their mission by critiquing individual countries. In so doing, they neglect their core task of hitting inflation targets and carefully offering advice to government. By going loudly public, their credence and authority is undermined.

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