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ECB resistance to Draghi's final push portends tough tenure for Lagarde

Incoming president may face policy makers seeking greater respect for their opinions after being browbeaten repeatedly by the outgoing chief

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Mr Draghi has had a track record of presenting often contentious decisions outside of policy meetings and only seeking the support of the Governing Council later.

Frankfurt

CHRISTINE Lagarde may this week get a sense of things to come under her presidency of the European Central Bank (ECB), as her forerunner in the role encounters resistance to the final stimulus push of his tenure.

Policy makers sceptical of the need for quantitative easing (QE) appear to be emboldened by Mario Draghi's impending exit and the advent of Ms Lagarde in November, according to euro-zone central bank officials with knowledge of the deliberations.

While no one doubts the sincerity of those who argue QE isn't needed right now, the dissenters also seem motivated by frustration at Mr Draghi's recent tactics in nudging the institution toward an ambitious package of measures, the officials said, asking not to be identified as such discussions are private.

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Those governors may be grasping the opportunity to send a signal that the Governing Council's opinions deserve greater respect.

The ECB's Executive Board meets on Tuesday to discuss policy options for this week's meeting. The current mood could mean that Mr Draghi's penultimate monetary-policy gathering - his 76th as president - is the last chance for governors to take a stand, after eight years in which he scored repeated successes in browbeating the council to follow his cue.

The Italian's style has been in marked contrast to the more collegiate, consensus-based approach of his predecessor, Jean-Claude Trichet.

Mr Draghi has had a track record of presenting often contentious decisions outside of policy meetings and only seeking the support of the Governing Council later. His most famous announcement - the pledge to do whatever it takes to save the euro in July 2012 - was added into a speech in London and took even his closest confidants by surprise.

Two years later at a Federal Reserve symposium in Jackson Hole, Wyoming, he put the central banks on course for the launch of QE. While he still faced stiff opposition when it was announced in January 2015, he got it through.

It's tempting to dismiss the current pushback as coming from the usual camp of monetary hawks. As in 2015, German, Dutch, Austrian and Estonian officials are leading the charge. But this time the opposition is sizeable enough to cast some doubt on the likelihood of a large package of stimulus measures.

The Governing Council rarely votes on major policy decisions, striving instead for unanimity or broad consensus - a point that Slovakian Governor Peter Kazimir said last month is critical for credibility. That may be hard to do when policy makers from countries representing half of the euro-area economy are against QE.

One telltale sign of the shifting consensus is the scepticism from Bank of France Governor Francois Villeroy de Galhau, who signalled that a rate cut and guidance over the path of rates may be enough.

Most ECB watchers still believe in Mr Draghi's ability to overcome the doubters. More than 80 per cent of economists surveyed by Bloomberg last week predicted the ECB will restart bond purchases.

But for some, it would be better to leave that decision until risks such as potential US tariffs on Europe and the nature of Brexit have become clearer.

"Some of the decisions that we have taken already cast quite a significant shadow into the future," Dutch Governor Klaas Knot said in a Bloomberg interview. "That is also why I would recommend a bit of caution." BLOOMBERG