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Biography : Mr. François Villeroy de Galhau is Chairman-Supervisory Board of Institut d’Émission des Département

IMF's Christine Lagarde Wins EU Support to Lead European Central Bank--Update

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07/02/2019 | 01:44pm EDT

By Valentina Pop and Brian Blackstone

BRUSSELS -- European leaders on Tuesday nominated International Monetary Fund Managing Director Christine Lagarde to become the next president of the European Central Bank.

As part of talks to decide on a slate of top jobs in the European Union, officials said member states decided to back Ms. Lagarde to succeed Mario Draghi, whose term ends on Oct. 31 and cannot be renewed. "The European Council nominates Christine Lagarde as candidate for President of the European Central Bank," tweeted European Council President Donald Tusk at the end of the discussions.

The formal approval of Ms. Lagarde's nomination, which requires a series of procedural moves, is likely to arrive in the coming months.

EU leaders nominated German Defense Minister Ursula von der Leyen on Tuesday to become the president of the European Commission, the bloc's executive arm, succeeding Jean-Claude Juncker.

Since the senior EU jobs must reconcile demands from the most powerful members of the bloc, the choice of a German as the top EU official means that France laid claim to the ECB presidency. French President Emmanuel Macron put forth Ms. Lagarde's name, which met the approval of other leaders in the meeting.

Ms. Lagarde, 63 years old, is a former French finance minister who in 2011 became the first woman to head the Washington-based IMF. She played an instrumental role in securing bailouts for ailing economies in Europe, especially Greece, following the 2008 financial crisis. Previously, she also worked in the private sector as an antitrust lawyer, becoming a partner and then the first female chairman of the Chicago-based law firm Baker McKenzie.

The choice of Ms. Lagarde would be a surprise to many. Although there have been no formal candidates for the post, speculation in recent months has centered around German central bank head Jens Weidmann, French ECB members Benoît Coeuré and François Villeroy de Galhau and former Finnish central banker Erkki Liikanen.

The choice of Ms. Lagarde would be a surprise to many. Although there have been no formal candidates for the post, speculation in recent months has centered around German central bank head Jens Weidmann, French ECB members Benoît Coeuré and François Villeroy de Galhau and former Finnish central banker Erkki Liikanen.

Ms. Lagarde's experience at the IMF would bring her the global stature needed to deal with any political pressure from European governments. But she lacks the monetary policy experience of the other candidates at a time when the central bank is weighing additional stimulus that could have some adverse side effects. ECB officials have recently flagged the possibility of interest-rate cuts, but with the ECB's deposit rate already at minus 0.4% this could damage banks.

Restarting bond purchases could prove controversial in Germany, where many blame the ECB's low interest-rate policies for wiping out the return on popular fixed-income saving products and for pushing up property prices and residential rents.

Meanwhile, the three key architects of the ECB's stimulus policies since 2012 have left the bank or soon will. In addition to Mr. Draghi, Mr. Coeuré's term expires at the end of the year, and former chief economist Peter Praet's term ended a few weeks ago.

That could trouble financial markets, especially since the ECB's vice president, Luis de Guindos, is a former Spanish economy minister who also didn't have central-banking experience when he joined the ECB last year.

The selection of Ms. von der Leyen to follow Mr. Juncker as president of the European Commission came after grueling talks that started Sunday and went almost uninterrupted until Tuesday afternoon.

The negotiations were a first indication of how euroskeptic leaders from Central Europe and Italy can wield force against a more fragmented pro-EU majority. Italy, Poland, Hungary, the Czech Republic and Slovakia fiercely opposed a tentative deal reached among the leaders of Germany, France and Spain during the Group of 20 summit in Japan last week to support a center-left candidate.

A compromise emerged Tuesday over a late lunch of chicken with Spanish sausage when EU leaders coalesced around Ms. von der Leyen. Negotiations hit a last-minute impasse as center-left politicians in the European Parliament signaled opposition to the German nominee.

Ms. von der Leyen, a 60-year old mother of seven, is Germany's first female defense minister and has a pro-European outlook. Born and raised in Brussels, she is a staunch supporter of building up the bloc's defense capabilities and is considered a close ally of German Chancellor Angela Merkel.

Ms. von der Leyen would be the first German head of the EU executive in more than half a century.

A new commission is slated to begin its five-year term on Nov. 1. Ms. von der Leyen and her still-unnamed commission members must first be approved by the European Parliament.

In addition to Ms. von der Leyen, leaders of the EU's 28 countries also nominated Spain's foreign minister Josep Borrell to become the bloc's foreign-policy representative, replacing Federica Mogherini of Italy. Prime Minister Charles Michel of Belgium was named president of the European Council, the grouping of national leaders who together steer the EU's activities. Donald Tusk of Poland has held the council presidency since 2014.

--Emre Peker in Brussels contributed to this article.

Write to Valentina Pop at valentina.pop@wsj.com and Brian Blackstone at brian.blackstone@wsj.com

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