Thursday 23 January 2020

German put in charge of QE to end sniping

Bonds

Isabel Schnabel is pro-QE
Isabel Schnabel is pro-QE

Paul Gordon

Christine Lagarde has a plan for rebutting German criticism of the bond-buying programme she inherited as European Central Bank (ECB) president: Put a German in charge of it.

Ms Lagarde has handed one of the ECB's highest roles to a German who has taken a stand against undue sniping at the institution's policies.

Isabel Schnabel, a University of Bonn economics professor and government adviser who has joined the Executive Board, is now responsible for market operations.

She'll oversee the €2.6trn quantitative easing programme controversially revived last year only months after it had been capped.

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QE still awaits a judgment in Germany's top court over accusations it illegally crosses the line between monetary and fiscal policy.

The portfolio, which will also include heading up ECB research, is a nod to Ms Schnabel's standing as an economist.

Her predecessor, Sabine Lautenschlaeger, was a lawyer who mostly held a senior role in bank supervision with less influence on monetary policy.

But it's also a recognition by Ms Lagarde that Ms Schnabel - the only other woman on the six-person board - is well-placed to counter mounting German-led hostility to the ECB's easy-money policies.

"Lagarde clearly signals that she sees Schnabel at the very centre of the ECB's core business, monetary policy," said Lucas Guttenberg, deputy director of the Jacques Delors Institute in Berlin. "This puts Schnabel in a good place to explain the ECB's policy in Germany."

Around a third of the 25-member Governing Council opposed restarting QE.

© Bloomberg

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