Christine Lagarde hands over a small white paper bag with something surprisingly heavy inside after sweeping through the restaurant with her customary assured elegance.
Taking off her black leather gloves before shaking hands — there’s a slight chill on this overcast day in Frankfurt — she explains: “It is marmalade I made with grapefruits from our garden in Corsica.”
I am disarmed by the gift. Maybe this is Lagarde’s intention. Can I accept it? Should I have brought something to give her? “I’ve been eating a grapefruit a day since about 45 years ago,” says the European Central Bank president, flashing a bright smile that sets off her cropped silver bob, white silk blouse, monochrome floral scarf and pearl earrings. “It gives you vitamin C and a little pep in the morning.”
We are in the Caféhaus Siesmayer, an unflashy Viennese-style coffee house best known for its indulgent French and German cakes. Our table is beside a full-height window looking on to the Palmengarten, the botanical garden built by Heinrich Siesmayer and opened in 1871 that is among Frankfurt’s top attractions.
It has been four years since Lagarde arrived in this city, already one of the most powerful women in the world. She left Washington, where she was running the IMF, as part of a Franco-German deal that moved her to the ECB while installing Berlin’s defence minister, Ursula von der Leyen, to run the European Commission.
“It is half-time, eh?” she says, observing that in a few days it will be the exact midpoint in her eight-year term and marvelling at what has been “a steep learning curve, but in the context of an incredible series of shocks, breaking points, shifts . . . it is enough to make you a bit tipsy”. This seems the perfect moment to take stock.
But first the waitress arrives to ask about drinks. Looking typically tanned, her blue-green eyes gleaming, Lagarde decides quickly: “You know, I will have sparkling water, I’m sorry it’s a bit boring . . . yeah.” Almost a teetotaller, she only makes an exception for “a coupe de champagne, or if there is a fantastic Bordeaux”.
The past four years have delivered a sobering “series of shocks — one after the other”. First the coronavirus pandemic crippled the economy only five months after Lagarde’s arrival as Europe’s monetary chief. Then Russia’s full-scale invasion of Ukraine two years later sent energy and food prices soaring, propelling eurozone inflation more than five times above the central bank’s 2 per cent target. In response, the ECB has raised interest rates an unprecedented 10 times to their highest level in its history, squeezing the economy so hard that growth has almost stopped. So what grade out of 10 would Lagarde give herself?
“Ooh, well, I have to show self-esteem and confidence so I would say 10,” she jokes. “No, I complain so much about women lacking confidence, so I should be careful not to be self-deprecating. But I’d say seven. There was a very, very brutal and abrupt learning curve to begin with. Then of course, if you are looking at key performance indicators, we are not at 2 per cent [inflation].” At the time of our meeting, it stands at 4.3 per cent.
Another waitress swings by and recommends the set menu. As she leaves, Lagarde says: “Now because I’m still hopeless in German, is that meat or fish?” My German is only slightly less hopeless so I roughly translate. The starter is salmon, one main is duck breast and the other is a saffron risotto. “And there is no meat in there?” she asks. “I don’t eat anything on four legs,” before adding playfully: “So I could eat you.”
The ECB has been criticised for reacting too slowly to last year’s inflation surge and Lagarde has admitted a failure to anticipate how much the energy crisis caused by Russia’s war in Ukraine would drive up consumer prices. “I think like so many others, we initially handled that like a textbook case of a supply shock,” she says. “The situation will resettle at the end of the shock and it will be absorbed . . . all of that was expected and none of that really happened.
“But what I regret personally is to have felt bound by our forward guidance,” she adds, referring to the commitment the ECB had given not to start raising interest rates until it had stopped buying billions of euros in mostly government debt, which it did slowly over the first six months of 2022. “I should have been bolder.”
Will the ECB do better in the next crisis? “The kind of supply shock that could possibly hit us, depending on how the situation evolves in the Middle East and how Iran is brought into this and what is the global reaction — these are huge question marks and massive worries on the horizon,” she says. “But what we should have learned is that we cannot just rely only on textbook cases and pure models. We have to think with a broader horizon.”
We meet as Lagarde is preparing to take the ECB on the road to Athens this week for its annual trip away from Frankfurt. This is a historic meeting for the central bank, ending its 15-month series of rate rises. But it is also a big moment for Greece, which recently regained its investment-grade credit rating a decade after its debt crisis nearly tore the eurozone apart. Lagarde received death threats as head of the IMF after she helped to draw up a brutal austerity plan as part of Greece’s bailout. It would have been “more efficient and probably better accepted if we had had a longer period of time over which to adjust”, she admits, regretting that at the IMF “all the programmes we had were short-term”.
Asked for our order, Lagarde and I both choose the risotto with tomatoes, sweet peppers and basil pesto from the set menu, with a starter of marinated salmon, potato rösti and a dill-mustard sauce. Lagarde says the cheesecake is the best this side of the Atlantic. I ask the waitress if we can have that instead of the petite pâtisserie and sorbet on the menu, only to be told: “I must ask.” As the waitress leaves, Lagarde says: “This is very German — ‘I must ask’.”
Is Frankfurt starting to feel like home? “It’s second home. It’s not home home. That is where the family is and my family is not here. That’s Paris predominantly,” she says. At weekends she often sees some of her seven grandchildren from two marriages. But at least eight times a year, she is in Frankfurt preparing for the upcoming ECB policy meeting. “I turn into a monk. I lock myself into my apartment with a stack of things to read. Then I will come for breakfast here or go to a museum to get a bit of fresh air.” Work days start at 5.30am with yoga, push-ups and her exercise bike. She often returns from the office after 8pm.
Lagarde is disappointed to learn that the Siesmayer’s manager, a former translator who spoke “pretty good French” to her and recommended cakes soon after she arrived in Frankfurt, has the day off. “I have a sweet tooth,” she confesses. Fellow ECB executive Fabio Panetta brought a fruit tart and a chocolate cake from Siesmayer to an emergency board meeting around Lagarde’s kitchen table at which they agreed a massive debt-buying scheme in response to the pandemic. The restaurant even opened late one summer evening two years ago to let the bank’s 25 governing council members take over its terrace for a dinner marking the end of a strategic review.
Our starters arrive and as Lagarde investigates hers, she asks: “You should have salmon in there, right?” I fork some leaves out of the way to reveal a neat circle of salmon tartar on top of the rösti. “There it is.”
Steering the conversation back to her abrupt learning curve, I bring up an early faux pas when she was asked at an ECB press conference for her reaction to rising alarm over Covid-19 deaths in northern Italy, which was pushing up the “spread” between Italian and German borrowing costs. Her ill-judged answer was: “We are not here to close spreads.”
Bond markets tumbled instantly as investors fretted that Lagarde was walking away from the commitment famously made by her Italian predecessor Mario Draghi, during a debt crisis a decade earlier, to do “whatever it takes” to defend the euro. Was this the moment she realised the high stakes of her new job?
“That’s a fair assessment,” she says. “I think there were two moments when I realised the danger and the power of words in that particular profession.” The first was in 2012, when she was in the front row of a conference in London listening to Draghi’s “whatever it takes” comment. Meeting the Italian afterwards, Lagarde remembers a breathless aide telling him that “markets are moving” and his cool response: “Oh really.”
“I think moment two was ‘we’re not here to close the spreads’, which was technically true. It was just not. .. ” she trails off. “I talked to colleagues and friends after that,” she says, listing Jay Powell, chair of the US Federal Reserve, Janet Yellen, his predecessor who is now Treasury Secretary, and Mark Carney, former governor of the Bank of England, among those she called, as well as Draghi. “Most of them, not all of them, but most of them said: ‘Welcome to the club, we all did the same thing. We all screwed up’.”
In a speech at the Fed’s Jackson Hole conference in August, Lagarde said a fragmentation of the world economy into competing geopolitical blocs was complicating the task of policymakers. “I didn’t know it would move so fast,” she says. Turning to the conflict between Israel and Hamas, she warns: “We have to be cautious. It might not be developing in the same way it did during the 1973 war, it might be different,” a reference to the Yom Kippur war between Israel and its Arab neighbours that caused the first global oil crisis. Europe’s open economy depends on trade, giving it an “inherent vulnerability” to such shocks, she admits.
Could this fragmenting world threaten the US dollar’s dominance as a reserve currency and in global trade, as Lagarde suggested in a speech in April? “I’m just observing,” she says. The risk comes from widening north-south divisions “and if we see China rallying the south materially”, especially with “Brazil and India and some of the Middle East countries that are trying to decide transactions in local currencies”. New digital currencies — like the one being worked on by the ECB — “will also play a role”, she predicts.
There is a flash of bright yellow, red and green, as our risottos are served surrounded by a white foam. “The colours are beautiful,” declares Lagarde. “Do you cook?” When I say yes, she replies: “I do too and I love the aesthetic.” Pausing to try a mouthful, she says that one of her two sons is a chef in Paris, before adding: “This is really good by the way.”
Growing up in Le Havre, on the Normandy coast, Lagarde was imbued with an independent spirit by her parents. Her mother Nicole became “a huge inspiration”, she says, sounding a touch emotional. Nicole raised four children on her own after Lagarde’s father Robert died when she was only 16, while also “multitasking to the extreme” by working as a languages professor, riding horses, racing rally cars, singing in a choir and sewing dresses. “She always wanted to be elegant,” Lagarde says.
At university in Paris, Lagarde studied law “but for the wrong reason, you see, because initially I wanted to fight the death penalty”. Before she even graduated, capital punishment had been abolished. Undeterred, she joined US law firm Baker McKenzie, rising to become its first female chair in 1999.
Since then her career appears to have been directed less by choice and more by calls to serve in public office. “You’re absolutely correct,” she says, remembering French prime minister Dominique de Villepin staying on the phone in 2005 after Lagarde asked for time to decide if she would return to France to become trade minister. “It was being called. The IMF, same thing, and the ECB, same thing,” she says. “I didn’t have the choice. I got the call. I responded yes, sometimes at my peril, sometimes with risk. But I’ve also enjoyed it.”
The French press occasionally speculate about a potential return to front-line politics in Paris. But Lagarde was convicted of negligence in 2016 by a French court, which did not hand down any sentence while saying she should have contested a government payout to entrepreneur Bernard Tapie when she was finance minister. Is a comeback even possible? “You can never say no,” she says. “But I very much doubt it.” Could she leave the ECB before her term expires in 2027? “I have a mission to complete, and I’m going to do it.” What will she do next? “There’ll be another call.”
While I’m asking about Lagarde’s passionate promotion of women’s rights, a waitress checks if we want dessert. “I don’t think I can take the cake,” she says. But when I express interest, she decides to share a slice. Having once declared that Lehman Brothers would not have collapsed if it had been Lehman Sisters, she says: “I want to clarify, because I don’t want to be seen as downgrading men and having a bias for women. It’s just that so often there has been, over the course of their life, discrimination, unfair selections, a delay applied to the progression of their career, that they had to just prove themselves more than men.”
Lagarde is often criticised by financial analysts for her lack of economic training. “I think some of it is sexism,” she says, her face hardening. “Some of it is, you know, their desire to stay within that narrow world of unique characterisation . . . I see my duty as being to the Europeans and not to the financial experts.”
A member of France’s synchronised swimming team in her youth, the 67-year-old still uses the breathing techniques she learned to deal with stress. “When I hear some governors, I go,” she inhales deeply using her abdomen. “And then you smile.” How does she keep convincing a room full of mostly male central bankers to support difficult policy decisions? “It requires a lot of preparation. Because if I didn’t make that effort, then they could discount me very easily,” she says. “The second thing is that throughout my life . . . I’ve always tried to listen, to pay attention and to pay respect to people.”
Almost on cue, the waitress brings our cheesecake, a knife and a second plate, asking if we would like to cut it ourselves. “Oh, you’ll do better,” says Lagarde, watching her slice it in half. “That’s good. Fine, fine, fine. Thank you so much.” As we tuck in to the creamy dessert, she says: “That’s an example: I could have said: ‘No, no, we’ll do it.’ But she took the trouble. She brought the knife. So she has to be given the respect of what she knows how to do. Same applies with the people I have to work with. Sometimes you have to just give space.”
Martin Arnold is the FT’s Frankfurt bureau chief
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