Published On: Wed, Oct 30th, 2019

European finance clash: Lagarde faces huge battle with German bank as ECB chief | World | News

She will have to prepare herself for a fight after the head of Germany’s central bank said yesterday the ECB should not be given an explicit role in tackling climate change. This is despite Ms Lagarde previously saying she wanted to explore the idea after taking over this Friday.

Jens Weidmann, president of the Bundesbank, said he opposed using monetary policy to tackle climate change, warning that it would “overburden” policy, threaten its independence and risk its neutrality.

The German bank boss said that he would view “very critically” any attempt to redirect a central bank’s actions towards climate change.

In a speech on Tuesday, he said: “I see demands for a green monetary policy, for example in the form of a ‘Green QE’ or a targeted privilege within the collateral framework, very critically.

“Such decisions should not be made by central banks, because they are not democratically legitimised.

“A monetary policy that explicitly pursues environmental goals risks being overburdened and in the long term, its independence could be called into question.”

His comments come days before Ms Lagarde takes the reins as ECB president, having headed the IMF since 2011.

Her nomination came as a surprise, as she is not an economist but a lawyer by training and previously served as France’s finance minister in Nicolas Sarkozy’s government.

Three years ago the 63-year old incoming ECB head was embroiled in a sketchy French scandal.

In 2016, she was found guilty of “negligence with public money” over a multi-million Euro payout to controversial French business tycoon and friend of Sarkozy, Bernard Tapie.

She was convicted by a French court, who waived a one-year prison sentence and a €15,000 (£12,600) fine on the grounds of her “international reputation”.

Ms Lagarde denied the negligence charges but did not appeal to the ruling.

She has shown a much greater interest in climate change than her predecessor, both in her previous job and ahead of her presidency.

At a confirmation hearing before the European Parliament in September, she promised the ECB would make tackling climate change a “mission-critical” priority.

She argued that it should be a priority for central banks and supervisors to look at how they have contribute to mitigating climate change.

Ms Lagarde is an outspoken critic of Brexit  — claiming she can’t see “any positive side to it”.

At a press conference in 2016, she warned Brexit would be “pretty bad, to very, very bad”.

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