What were EU leaders thinking to want Christine Lagarde in charge of the European Central Bank?

What were EU leaders thinking to want Christine Lagarde in charge of the European Central Bank?

Christine Lagarde, currently Managing Director of the IMF on a £335,000 wage, was in 2016 found guilty of negligence by a French court for having approved a payout of over €400 million of taxpayers’ money to controversial French businessman Bernard Tapie. Yet this week, she was nominated to be the next President of the European Central Bank. 

The timeline of the controversy with which she was involved began in 1992 when Tapie, who has served time in jail, voluntarily sold his shares in Adidas to a bank partly owned by the French state. Crédit Lyonnais then sold the shares for an increased amount of money and Tapie immediately cried foul. He criticised the bank’s valuation and began a long drawn-out legal battle that would see it into the next millennium.

Enter Mme. Lagarde who, as then Finance Minister of France, took the decision to refer the case to an external, private arbitration panel (taking it away from the courts) in 2007. The panel, which consisted of three members, subsequently in 2008 reached the conclusion that Tapie should be awarded over €400 million, including an additional €25 million for “moral damage”. The sizeable payment notably went well beyond conventional compensation as it additionally included interest and “other costs”. 

The amount Mr Tapie was paid was furthermore considerably larger than the difference in value between the figure for which Crédit Lyonnais initially bought his shares (€320 million) and the amount for which they were later sold (€560 million). The panel’s decision immediately sparked outcry and heavy scrutiny as Lagarde refused to challenge the ruling. 

Critics have pointed out that M. Tapie, who in the 1990s had served as a politician in France’s National Assembly for the pro-European ‘Radical Party of the Left’, had suspiciously thrown his support – alongside significant financial backing – behind centre-right Nicolas Sarkozy’s successful 2007 presidential campaign. Mme. Lagarde and the head of her party, M. Sarkozy, have been accused of engaging in a ‘corrupt system of favours at the highest level.

So it was that in December 2016, Lagarde was found guilty of negligence and personally implicated in the decision not to challenge the panel’s decision. Yet despite initially facing fines and up to a year in prison, she managed to escape any punishment. The Court of Justice of the Republic, which reached this decision, stated that her national and international reputation had to be taken into account.

So her nomination this week to head European Central Bank is a questionable one and came on the same day that ousted Belgian head-of-state Charles Michel – who months ago lost a vote of no-confidence as his government collapsed – was chosen for the role of President of the European Council. Meanwhile, staunch Euro-federalist Ursula von der Leyen was nominated to be President of the European Commission – herself head of a German ministry facing investigation.

Perhaps the sensible option for the Council, given volatile contextual political circumstances, would have been to exercise more restraint and caution in their appointments – selecting nominees with cleaner track records and less controversy. In defiantly selecting Lagarde, Michel and von der Leyen, the Council has shown defiance insofar as it cares little about the antagonism it causes.

Lagarde’s record certainly brings her trustworthiness overseeing the handling of ‘public’ funds into question. Were there no better candidates? Did every contender bring with them equally as much baggage? It seems hard to believe. The selections show, in the very least, the European Council were ambivalent towards and unconcerned with Lagarde’s past. It is yet to be seen whether European citizens will feel the same.