‘I ought to have been bolder’

Christine Lagarde fingers over a small white paper bag with one thing surprisingly heavy inside after sweeping by the restaurant together with her customary assured class. 

Taking off her black leather-based gloves earlier than shaking fingers — there’s a slight chill on this overcast day in Frankfurt — she explains: “It’s marmalade I made with grapefruits from our backyard in Corsica.”

I’m disarmed by the present. Perhaps that is Lagarde’s intention. Can I settle for it? Ought to I’ve introduced one thing to offer her? “I’ve been consuming a grapefruit a day since about 45 years in the past,” says the European Central Financial institution president, flashing a shiny smile that units off her cropped silver bob, white silk shirt, monochrome floral scarf and pearl earrings. “It offers you vitamin C and slightly pep within the morning.”

We’re within the Caféhaus Siesmayer, an unflashy Viennese-style espresso home finest identified for its indulgent French and German desserts. Our desk is beside a full-height window trying on to the Palmengarten, the botanical backyard constructed by Heinrich Siesmayer and opened in 1871 that’s amongst Frankfurt’s prime sights. 

It has been 4 years since Lagarde arrived on this metropolis, already probably the most highly effective ladies on this planet. She left Washington, the place she was operating the IMF, as a part of a Franco-German deal that moved her to the ECB whereas putting in Berlin’s defence minister, Ursula von der Leyen, to run the European Fee. 

“It’s half-time, eh?” she says, observing that in a couple of days it is going to be the precise midpoint in her eight-year time period and marvelling at what has been “a steep studying curve, however within the context of an unbelievable sequence of shocks, breaking factors, shifts . . . it is sufficient to make you a bit tipsy”. This appears the proper second to take inventory. 

However first the waitress arrives to ask about drinks. Wanting sometimes tanned, her blue-green eyes gleaming, Lagarde decides shortly: “, I’ll have glowing water, I’m sorry it’s a bit boring . . . yeah.” Nearly a teetotaller, she solely makes an exception for “a coupe de champagne, or if there’s a unbelievable Bordeaux”.

The previous 4 years have delivered a sobering “sequence of shocks — one after the opposite”. First the coronavirus pandemic crippled the economic system solely 5 months after Lagarde’s arrival as Europe’s financial chief. Then Russia’s full-scale invasion of Ukraine two years later despatched power and meals costs hovering, propelling eurozone inflation greater than 5 instances above the central financial institution’s 2 per cent goal. In response, the ECB has raised rates of interest an unprecedented 10 instances to their highest stage in its historical past, squeezing the economic system so onerous that development has nearly stopped. So what grade out of 10 would Lagarde give herself?

What we should always have discovered is that we can’t simply rely solely on textbook circumstances and pure fashions. Now we have to suppose with a broader horizon

“Ooh, nicely, I’ve to point out vanity and confidence so I might say 10,” she jokes. “No, I complain a lot about ladies missing confidence, so I needs to be cautious to not be self-deprecating. However I’d say seven. There was a really, very brutal and abrupt studying curve to start with. Then after all, in case you are taking a look at key efficiency indicators, we aren’t at 2 per cent [inflation].” On the time of our assembly, it stands at 4.3 per cent.

One other waitress swings by and recommends the set menu. As she leaves, Lagarde says: “Now as a result of I’m nonetheless hopeless in German, is that meat or fish?” My German is barely barely much less hopeless so I roughly translate. The starter is salmon, one most important is duck breast and the opposite is a saffron risotto. “And there’s no meat in there?” she asks. “I don’t eat something on 4 legs,” earlier than including playfully: “So I may eat you.”

The ECB has been criticised for reacting too slowly to final yr’s inflation surge and Lagarde has admitted a failure to anticipate how a lot the power disaster brought on by Russia’s struggle in Ukraine would drive up client costs. “I believe like so many others, we initially dealt with that like a textbook case of a provide shock,” she says. “The state of affairs will resettle on the finish of the shock and it is going to be absorbed . . . all of that was anticipated and none of that actually occurred. 

“However what I remorse personally is to have felt certain by our ahead steering,” she provides, referring to the dedication the ECB had given to not begin elevating rates of interest till it had stopped shopping for billions of euros in principally authorities debt, which it did slowly over the primary six months of 2022. “I ought to have been bolder.”

Will the ECB do higher within the subsequent disaster? “The form of provide shock that would probably hit us, relying on how the state of affairs evolves within the Center East and the way Iran is introduced into this and what’s the international response — these are big query marks and big worries on the horizon,” she says. “However what we should always have discovered is that we can’t simply rely solely on textbook circumstances and pure fashions. Now we have to suppose with a broader horizon.”

We meet as Lagarde is making ready to take the ECB on the highway to Athens this week for its annual journey away from Frankfurt. It is a historic assembly for the central financial institution, ending its 15-month sequence of charge rises. However it is usually a giant second for Greece, which not too long ago regained its investment-grade credit standing a decade after its debt disaster practically tore the eurozone aside. Lagarde obtained dying threats as head of the IMF after she helped to attract up a brutal austerity plan as a part of Greece’s bailout. It will have been “extra environment friendly and possibly higher accepted if we had had an extended time period over which to regulate”, she admits, regretting that on the IMF “all of the programmes we had had been short-term”.

Requested for our order, Lagarde and I each select the risotto with tomatoes, candy peppers and basil pesto from the set menu, with a starter of marinated salmon, potato rösti and a dill-mustard sauce. Lagarde says the cheesecake is one of the best this facet of the Atlantic. I ask the waitress if we are able to have that as a substitute of the petite pâtisserie and sorbet on the menu, solely to be instructed: “I need to ask.” Because the waitress leaves, Lagarde says: “That is very German — ‘I need to ask’.” 

Is Frankfurt beginning to really feel like dwelling? “It’s second dwelling. It’s not dwelling dwelling. That’s the place the household is and my household isn’t right here. That’s Paris predominantly,” she says. At weekends she typically sees a few of her seven grandchildren from two marriages. However a minimum of eight instances a yr, she is in Frankfurt making ready for the upcoming ECB coverage assembly. “I flip right into a monk. I lock myself into my condo with a stack of issues to learn. Then I’ll come for breakfast right here or go to a museum to get a little bit of recent air.” Work days begin at 5.30am with yoga, push-ups and her train bike. She typically returns from the workplace after 8pm.

Lagarde is upset to be taught that the Siesmayer’s supervisor, a former translator who spoke “fairly good French” to her and beneficial desserts quickly after she arrived in Frankfurt, has the break day. “I’ve a candy tooth,” she confesses. Fellow ECB govt Fabio Panetta introduced a fruit tart and a chocolate cake from Siesmayer to an emergency board assembly round Lagarde’s kitchen desk at which they agreed an enormous debt-buying scheme in response to the pandemic. The restaurant even opened late one summer season night two years in the past to let the financial institution’s 25 governing council members take over its terrace for a dinner marking the tip of a strategic evaluate.

Our starters arrive and as Lagarde investigates hers, she asks: “It’s best to have salmon in there, proper?” I fork some leaves out of the way in which to disclose a neat circle of salmon tartar on prime of the rösti. “There it’s.”

Steering the dialog again to her abrupt studying curve, I convey up an early fake pas when she was requested at an ECB press convention for her response to rising alarm over Covid-19 deaths in northern Italy, which was pushing up the “unfold” between Italian and German borrowing prices. Her ill-judged reply was: “We’re not right here to shut spreads.” 

Bond markets tumbled immediately as buyers fretted that Lagarde was strolling away from the dedication famously made by her Italian predecessor Mario Draghi, throughout a debt disaster a decade earlier, to do “no matter it takes” to defend the euro. Was this the second she realised the excessive stakes of her new job?

Most of Lagarde’s fellow central bankers instructed her: ‘Welcome to the membership, all of us did the identical factor. All of us screwed up’

“That’s a good evaluation,” she says. “I believe there have been two moments after I realised the hazard and the ability of phrases in that exact occupation.” The primary was in 2012, when she was within the entrance row of a convention in London listening to Draghi’s “no matter it takes” remark. Assembly the Italian afterwards, Lagarde remembers a breathless aide telling him that “markets are transferring” and his cool response: “Oh actually.”

“I believe second two was ‘we’re not right here to shut the spreads’, which was technically true. It was simply not. .. ” she trails off. “I talked to colleagues and buddies after that,” she says, itemizing Jay Powell, chair of the US Federal Reserve, Janet Yellen, his predecessor who’s now Treasury Secretary, and Mark Carney, former governor of the Financial institution of England, amongst these she known as, in addition to Draghi. “Most of them, not all of them, however most of them mentioned: ‘Welcome to the membership, all of us did the identical factor. All of us screwed up’.”

In a speech on the Fed’s Jackson Gap convention in August, Lagarde mentioned a fragmentation of the world economic system into competing geopolitical blocs was complicating the duty of policymakers. “I didn’t know it could transfer so quick,” she says. Turning to the battle between Israel and Hamas, she warns: “Now we have to be cautious. It may not be creating in the identical method it did in the course of the 1973 struggle, it could be completely different,” a reference to the Yom Kippur struggle between Israel and its Arab neighbours that brought on the primary international oil disaster. Europe’s open economic system relies on commerce, giving it an “inherent vulnerability” to such shocks, she admits. 

Might this fragmenting world threaten the US greenback’s dominance as a reserve foreign money and in international commerce, as Lagarde instructed in a speech in April? “I’m simply observing,” she says. The chance comes from widening north-south divisions “and if we see China rallying the south materially”, particularly with “Brazil and India and a few of the Center East nations which might be attempting to determine transactions in native currencies”. New digital currencies — just like the one being labored on by the ECB — “will even play a task”, she predicts. 

There’s a flash of shiny yellow, purple and inexperienced, as our risottos are served surrounded by a white foam. “The colors are stunning,” declares Lagarde. “Do you cook dinner?” After I say sure, she replies: “I do too and I really like the aesthetic.” Pausing to strive a mouthful, she says that one in all her two sons is a chef in Paris, earlier than including: “That is actually good by the way in which.”

Rising up in Le Havre, on the Normandy coast, Lagarde was imbued with an unbiased spirit by her dad and mom. Her mom Nicole grew to become “an enormous inspiration”, she says, sounding a contact emotional. Nicole raised 4 youngsters on her personal after Lagarde’s father Robert died when she was solely 16, whereas additionally “multitasking to the intense” by working as a languages professor, driving horses, racing rally automobiles, singing in a choir and stitching attire. “She at all times needed to be elegant,” Lagarde says.

At college in Paris, Lagarde studied regulation “however for the improper cause, you see, as a result of initially I needed to combat the dying penalty”. Earlier than she even graduated, capital punishment had been abolished. Undeterred, she joined US regulation agency Baker McKenzie, rising to turn out to be its first feminine chair in 1999. 

Since then her profession seems to have been directed much less by alternative and extra by calls to serve in public workplace. “You’re completely appropriate,” she says, remembering French prime minister Dominique de Villepin staying on the telephone in 2005 after Lagarde requested for time to determine if she would return to France to turn out to be commerce minister. “It was being known as. The IMF, similar factor, and the ECB, similar factor,” she says. “I didn’t have the selection. I bought the decision. I responded sure, typically at my peril, typically with danger. However I’ve additionally loved it.” 

I see my responsibility as being to the Europeans and to not the monetary consultants

The French press often speculate a couple of potential return to front-line politics in Paris. However Lagarde was convicted of negligence in 2016 by a French court docket, which didn’t hand down any sentence whereas saying she ought to have contested a authorities payout to entrepreneur Bernard Tapie when she was finance minister. Is a comeback even doable? “You possibly can by no means say no,” she says. “However I very a lot doubt it.” Might she go away the ECB earlier than her time period expires in 2027? “I’ve a mission to finish, and I’m going to do it.” What’s going to she do subsequent? “There’ll be one other name.”

Whereas I’m asking about Lagarde’s passionate promotion of ladies’s rights, a waitress checks if we wish dessert. “I don’t suppose I can take the cake,” she says. However after I specific curiosity, she decides to share a slice. Having as soon as declared that Lehman Brothers wouldn’t have collapsed if it had been Lehman Sisters, she says: “I wish to make clear, as a result of I don’t wish to be seen as downgrading males and having a bias for ladies. It’s simply that so typically there was, over the course of their life, discrimination, unfair picks, a delay utilized to the development of their profession, that they needed to simply show themselves greater than males.”

Lagarde is commonly criticised by monetary analysts for her lack of financial coaching. “I believe a few of it’s sexism,” she says, her face hardening. “A few of it’s, , their need to remain inside that slender world of distinctive characterisation . . . I see my responsibility as being to the Europeans and to not the monetary consultants.”

A member of France’s synchronised swimming staff in her youth, the 67-year-old nonetheless makes use of the respiratory strategies she discovered to take care of stress. “After I hear some governors, I’m going,” she inhales deeply utilizing her stomach. “And then you definately smile.” How does she preserve convincing a room stuffed with principally male central bankers to assist troublesome coverage choices? “It requires lots of preparation. As a result of if I didn’t make that effort, then they may low cost me very simply,” she says. “The second factor is that all through my life . . . I’ve at all times tried to hear, to concentrate and to pay respect to individuals.”

Nearly on cue, the waitress brings our cheesecake, a knife and a second plate, asking if we want to reduce it ourselves. “Oh, you’ll do higher,” says Lagarde, watching her slice it in half. “That’s good. Positive, effective, effective. Thanks a lot.” As we tuck in to the creamy dessert, she says: “That’s an instance: I may have mentioned: ‘No, no, we’ll do it.’ However she took the difficulty. She introduced the knife. So she needs to be given the respect of what she is aware of find out how to do. Similar applies with the individuals I’ve to work with. Generally it’s a must to simply give area.”

Martin Arnold is the FT’s Frankfurt bureau chief

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