The Argentine Disaster Is (Also) a Lagarde Legacy

Oct. 29, 2019 (EIRNS)—While the canonization of St. Mario Draghi continued on Monday at the European Central Bank headquarters in Frankfurt, with the participation of Angela Merkel, Emmanuel Macron, Sergio Mattarella, Wolfgang Schäuble, and others, economist Thomas Mayer reminded us of some things about Draghi’s successor as ECB President, former IMF Managing Director Christine Lagarde, who will take office Nov. 1.

“One year ago, Mrs. Lagarde promoted an aid program for Argentina,” Mayer wrote today in a guest column in FocusOnline. “With a total volume of $57 billion, this is the largest program in the history of the IMF. Mrs. Lagarde remarked that the money would ‘strengthen the confidence of the markets.’ This proved to be a serious mistake. Since mid-August, investors are fleeing the country and savers are clearing out their deposits. Argentina is heading towards the ninth bankruptcy in its history. Now, Christine Lagarde is succeeding Mario Draghi as president of the ECB.

“The markets have reacted to Mrs. Lagarde’s nomination with a rate cut. They expect that the new ECB president will continue the course initiated by Draghi that has put the central bank at the service of politics. They may be right. Like Draghi, she will do ‘whatever it takes’ to save the euro, even if this means breaking the rules.”

(Focus Online, Oct. 28: “With Lagarde as ECB President, the Bundesbank Tradition Will Perish Completely”; “Mit Lagarde an der EZB-Spitze stirbt die Tradition der Bundesbank vollends”)

Mayer is a former Deutsche Bank chief economist and works now for the Flossback von Storch Research Institute. He also worked for Goldman Sachs, Salomon Brothers, the International Monetary Fund and the Institute for the World Economy in Kiel. He is an Austrian School economist who calls for eliminating bank credit (“active money”). But as it happens also with broken clocks, he might be right twice a day. In 2011 he called for Greece to leave the euro and be granted a debt cut.