Lagarde’s Estranged ECB Must Engage With Germans, Asmussen Says

(Bloomberg) --

The European Central Bank must engage much more with Germans under incoming President Christine Lagarde to prevent further fraying of the institution’s relationship with the biggest euro member, according to former Executive Board member Joerg Asmussen.

“Germany and the ECB have become estranged, and I’m watching this with concern,” Asmussen said in an interview, as he spoke of the challenges facing Lagarde and Isabel Schnabel, her prospective German colleague on the board. Schnabel was nominated on Wednesday to take up the seat that Asmussen held for two years until the start of 2014.

“Isabel Schnabel and the ECB will need to counter this,” he said. “Christine Lagarde will have to seek a conversation with the public, and I’m confident she will reach out.”

Of the four Germans who have previously served on the Executive Board, Asmussen is the only one to have built a career in national politics rather than the Bundesbank. Drawing from that background, he often defended the ECB publicly at events across the country, including at smaller cities, and cited his experience as the better approach to follow.

“They have to communicate, not just in Frankfurt, Munich or Berlin,” he said. “It’s difficult, but you need to reach beyond urban centers and expert audiences.”

Constructive Signal

Asmussen, who is now a managing director at Lazard & Co GmbH in Frankfurt, said Schnabel in particular will need to focus on the German audience. He commended the decision by Chancellor Angela Merkel’s government to nominate her.

“She is a good choice because she’s been quite neutral vis-a-vis the ECB in her public comments,” he said. “Isabel Schnabel’s nomination is a signal from Berlin that there’s willingness to be more constructive.”

The comments reflect how Germany’s relationship with the ECB hasn’t been helped by public criticism from the Bundesbank. President Jens Weidmann was on the losing side of an argument in September over the resumption of quantitative easing by ECB chief Mario Draghi, in what became an unprecedented revolt by dissenters.

Asmussen said the festering split on the Governing Council is “not healthy and needs to be fixed urgently.”

“Christine Lagarde will have to invest heavily in team building,” he said. “In public, policy makers have to stand together. Once a decision is taken, it needs to be defended with one voice. Everything else is unsettling -- for financial markets and the public.”

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