One year in, Lagarde stamps her style on crisis-fighting ECB

That brings with it the advantage of more engagement and openness, but also the risk that mixed or unscripted messages can roil markets

FRANKFURT “I’m going to be myself, and therefore probably different,” Christine Lagarde declared in a defining monologue at her first press conference as European Central Bank (ECB) president in late 2019.

That moment, signalling her intention to put a personal stamp on the institution’s communication, has been matched by a distinctive approach since taking office on Nov 1 last year. It’s very much a break with the past, even considering the extraordinary events of the coronavirus crisis that have dominated her reign.

The new style, in keeping with Lagarde’s stated aim to build a “bridge with the public”, often means more frequent remarks by the president and Executive Board than under her predecessor Mario Draghi. That brings with it the advantage of more engagement and openness, but also the risk that mixed or unscripted messages can roil markets.

A major test of her communication approach was met last week with a decisive and clear message that was widely praised by investors. It was helped by the Governing Council’s unanimity in the view that Europe will need more stimulus to deal with the recession likely to accompany the second wave of the coronavirus pandemic.

At times, “it has been difficult to tell who to listen to, whereas with Draghi it was clear,” said Carsten Brzeski, an economist at ING Germany. Nevertheless, Lagarde is now “accepting what’s required of an ECB president in terms of communication.”

More frequent messaging by multiple board officials has also made it harder to assess ECB policy (pic: Bloomberg)

Speaking Schedule

In the seven weeks between the September and October policy meetings, the six-member board racked up more than 60 public appearances via online conferences, blogs and interviews on a wide range of topics.

The president herself has been prolific with media. The ECB’s website lists 14 interviews by Lagarde in the last 12 months. That compares to a single one in the final year of her predecessor, who rarely spoke to individual news outlets.

Some of the board’s frenzy of utterances might be explained by the ECB’s state of alert giving officials plenty to talk about. Working via video rather than attending events has also made it far easier to accept invitations coming their way.

Nevertheless, the ECB’s multi-channel, all-hours approach to broadcasting its views has been remarkable. Lagarde even managed almost to upstage herself on Oct 19, when she spoke at a French event and released a pre-recorded statement at a separate conference within the span of a few minutes.

Charming Germans

More communication can reinforce public engagement and repair what Lagarde sees as a lack of understanding of the ECB. That’s part of the institution’s strategy review, which has given civil-society organisations an opportunity to voice concerns. She has also spent time charming Germans miffed at poor returns caused by negative interest rates.

“If you’re only talking to the markets, which was the ECB’s modus operandi before, you’re not reaching the general public,” said Nick Kounis, an economist at ABN Amro Bank NV in Amsterdam. “Lagarde is trying to change that. But if you’re talking to two different groups, you need to be thinking carefully about who you’re talking to and when.”

That tension between balancing plain speaking with communicating to investors was a lesson she learned the hard way. In March, when Lagarde seemed to suggest the ECB didn’t see its role as backstopping the integrity of the euro, investors dumped Italian bonds.

More frequent messaging by multiple board officials has also made it harder to assess ECB policy, according to ING’s Brzeski. He says the advantage of the Draghi era was that following what the president and his chief economist at the time Peter Praet had to say was enough to form a view.

Kitchen Cabinet

Former chief Draghi bequeathed a strongly divided Governing Council, which comprises the board and the 19 national central-bank governors (pic: Bloomberg)

But criticisms levelled at the former chief charged that he took decisions in a small circle rather than building a wider consensus. Draghi bequeathed a strongly divided Governing Council, which comprises the board and the 19 national central-bank governors.

That legacy has already forced Lagarde to speak less openly on the policy unless colleagues have been consulted. While that has helped re-establish the notion that disagreements should stay behind closed doors, rifts are almost certain to re-emerge, for instance on exactly how the ECB should expand stimulus in December.

How the question of Governing Council unity develops will be a key challenge next year for the ECB’s incoming communications chief, Wolfgang Proissl.

The result, for now, is that Lagarde has established herself as the ECB’s public figurehead who is central to projecting the image of her institution but is less recognised as the key communicator of its messaging.

“She’s not really the one that shows the force in terms of where the ECB’s is headed, so you have to pay more attention to the other ones as well,” said Jan von Gerich, chief strategist at Nordea Bank ABP. “Time will tell how the Lagarde approach will do. From a market perspective, the Draghi way was clearer and more efficient.” — Bloomberg