#EUTopJobs - New-era EU leadership emerges from stalemate

Neither the IMF’s Christine Lagarde (pictured) nor Germany’s Ursula von der Leyen was considered a main contender for the ECB or European Commission respectively, and their nomination ultimately had as much to do with the political expediency needed to break a deadlock as their narrow suitability for the roles in question.

Assuming their nominations are confirmed (still a relatively sizeable “if” as far as von der Leyen is concerned), they will bring skills to the table that diverge radically from those of their predecessors.

Lagarde's impulses lie in politics and consensus-building, but she lacks direct monetary policy experience; von der Leyen is a tri-lingual polymath who has impeccable European credentials but whose managerial expertise is questionable after a series of crises in her department as German defence minister. However they fare, this promises to be an interesting break with the much-criticised style and image of the EU leadership in the past.

Von der Leyen must secure the backing of the European Parliament, which from today will start poring over her record: she will get a rough ride but few expect her to be rejected outright. Lagarde's nomination has already been welcomed by an easing of euro zone bond yields as financial markets expect the French national to pursue the dovish policy stance of Mario Draghi.

Most of the action on world markets continues to be in bonds, with a fresh slide in benchmark debt yields on simmering global trade war and recession fears, central bank easing bets and ebbing oil prices.

The EU summit’s nomination of IMF chief Lagarde as Draghi’s replacement at the ECB also reinforced expectations for easier monetary policy. Lagarde is expected to sustain Draghi’s approach to do “whatever it takes” to get inflation back to target, and her nomination eases market concerns that the more hawkish Bundesbank chief, Jens Weidmann, might get the job.

Bond markets greeted the decision by sinking German 10-year yields to record lows of minus 39 basis points first thing on Wednesday, and many of the other euro government yields following suit into record low territory.

Italian 10-year yields and spreads over Germany dropped to their lowest in a year, as Italian officials said they were confident the EU Commission would not pursue budget disciplinary action against Rome after 2019’s deficit forecast was cut to near 2% of gross domestic product.

The euro fell as well after slipping below $1.13 yesterday. European stock futures were up before the open. The nomination of Von Der Leyen to head the European Commission was also seen as a "safe pair of hands" running the EU executive rather than a major disruption.

Yet while Lagarde’s nomination reinforces expectations of easier European monetary policy, anxiety about the weakening of global business sentiment amid the protectionist push against China and increasingly against Europe by the United States shows why monetary policymakers are on high alert and why inflation expectations and bond yields are on the wane.