By Jack Ewing
Christine Lagarde will be sworn in as Mr. Draghi’s successor on Tuesday, and immediately confront a revolt by members of the bank’s Governing Council who believe the bank’s easy money policies have created asset bubbles and set the stage for a financial crisis.
The Governing Council did not make any changes to monetary policy at the meeting on Thursday, six weeks after it took action to head off recession in the 19 countries in the eurozone.
These decisions inspired an unusually open backlash from some members of the Governing Council, from countries including Germany and the Netherlands, who believe they were unnecessary and reckless.
Klaas Knot, the president of the Dutch central bank, said the measures were “disproportionate to the present economic conditions.”
“There are increasing signs of scarcity of low-risk assets, distorted pricing in financial markets and excessive risk-seeking behavior in the housing markets,” Mr. Knot said in a statement in September.
The dissenters appear to be taking advantage of the leadership transition to stake out their views while Ms. Lagarde is new in the job and has not had a chance to establish her authority.
Ms. Lagarde will soon acquire a potential ally in this debate. The German government on Tuesday nominated Isabel Schnabel, a member of the German Council of Economic Experts, to a vacancy on the central bank’s Executive Board. If confirmed, Ms. Schnabel will replace Sabine Lautenschläger on the six-person board, which is part of the Governing Council and manages the operations of the central bank.
Ms. Lautenschläger resigned last month. She did not give a reason, but is widely assumed to have been unhappy with the central bank’s course. She was also the only woman on the 25-person Governing Council, a gender imbalance that was a focus of a conference at the bank’s headquarters on Tuesday. Ms. Schnabel’s appointment, and the arrival of Ms. Lagarde, brings that number to two.
In contrast to much of the German economics establishment, Ms. Schnabel, a professor of economics at the University of Bonn, is regarded as a supporter of the policies pursued under Mr. Draghi.
The decision last month to increase stimulus was a response to signs of an economic slowdown caused by trade war, Brexit and conflict in the Middle East.
But even some economists who supported those measures have become concerned that cheap credit is creating real estate bubbles.