With 2019 winding down, major changes are taking place at key institutions in Europe, which could have a significant effect on the euro and on European stock markets. In October, Mario Draghi stepped down as president of the European Central Bank, one of the most influential financial positions in the world. Draghi has been replaced by Christine Lagarde, who until recently was head of the International Monetary Fund. The currency and equity markets showed little reaction to the changing of the guard, which no doubt delighted Draghi, who deplored volatility in the markets under his watch.
Another key appointment took place earlier this month at the European Commission. Paolo Gentiloni was appointed as European Commissioner for Economic and Financial Affairs. Gentiloni acted as Italy’s foreign minister and then became prime minister from 2016-2018. Gentiloni is a staunch Europeanist and a strong supporter of European countries becoming more closely integrated. On Thursday, Gentiloni warned that the European Union’s current budget framework is not a good fit with current economic conditions in the EU, which are characterized by weak growth and low inflation. The European Commission is conducting a review of its fiscal framework in early 2020, and Gentiloni will be seeking to establish a more coordinated fiscal policy in the eurozone, with the aim of increased monetary integration among countries that share the euro.
For her part, Christine Lagarde has pledged to carry out a review of the ECB’s monetary policy framework, similar to Gentiloni’s plan to review the EU’s fiscal setup. This means that we could see significant changes in 2020 at two of the most influential institutions in the European Union – the European Central Bank and the European Commission.