Lagarde seen in pole position to replace ECB's Draghi

By Balazs Koranyi

FRANKFURT (Reuters) - A shrewd negotiator who has run the IMF but has little monetary policy experience, Christine Lagarde would face the challenge as the European Central Bank's new chief of having to revive the euro zone economy with a nearly depleted policy arsenal.

Once France's first woman finance minister, and head of the International Monetary Fund since 2011, she is a strong advocate of female empowerment who has long argued that more women in banking and regulation would aid financial sector stability.

While her selection to replace Mario Draghi at the ECB from November is far from certain, diplomatic sources suggest French President Emmanuel Macron has proposed her for the job and that German Chancellor Angela Merkel's response was "very positive". That puts Lagarde in pole position.

If picked, she would also start to break down a gender barrier at the ECB, which remains heavily male-dominated despite having set equality as a priority for years.

Lagarde, 63, has blamed the global financial crisis a decade ago in part on testosterone-fuelled greed, once saying: "If it had been Lehman Sisters rather than Lehman Brothers, the world might well look a lot different today."

Consistently ranked among the top 10 most powerful women by Forbes magazine, she has rebuilt the IMF's credibility following Greece's 2010 bailout, which not only bent the Fund's own rules but needed to be followed up with more aid over years.

A former synchronized swimmer, Lagarde presided over the IMF's biggest bailout, a $57 billion deal for Argentina last year that was widely credited with arresting emerging market turbulence that risked derailing global growth.

But her selection would be likely to surprise many -- not least because when asked last year if she was interested in the ECB role, she told the Financial Times: "No, no, no no, no no." Her term at the IMF runs until July 2021.

Lagarde's immediate challenge at the ECB would be to overcome her shortcomings in monetary policymaking, especially as it seeks to rearm for a potential new slump after years of using unconventional policy tools to stimulate inflation and growth.

A former antitrust lawyer with Baker McKenzie, the divorced mother of two became French finance minister in 2007, then took over at the IMF when a sex scandal forced her predecessor Dominique Strauss-Kahn to quit.

A non-economist leading a major central bank is unusual, although U.S. Federal Reserve chairman Jay Powell is also a trained lawyer and spent much of his career in private equity.

Another complication for Lagarde would be her 2016 conviction on negligence charges over a state payout made in 2008 while she was finance minister. While judges said her failure to contest a 400 million euro state settlement led to a misuse of public funds, she escaped punishment and the IMF board reaffirmed her in her post.

But Lagarde also has a global perspective that many of her rivals for the ECB job lack.

She has spent much of this year warning about the global impact of the U.S.-China trade war and vowed to maintain the IMF's lending firepower -- about $1 trillion -- so it could backstop any scenario.

(Additional reporting by David Lawder in Washington; Editing by Catherine Evans)

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