Mario Draghi

Candidacy

Draghi was frequently mentioned as a potential successor to Jean-Claude Trichet, whose term as President of the European Central Bank ended in October 2011.^[16] Then, in January 2011, German weekly newspaper Die Zeit reported, with reference to high-ranking policy-makers in Germany and France, that it is "unlikely" that Draghi will be picked as Trichet's successor.^[17] However, in February 2011 the situation became further complicated when the main German candidate, Axel Weber, was reported to be no longer seeking the job, reviving the chances of the other candidates.^[18] On 13 February 2011 Wolfgang Münchau, associate editor of the Financial Times, endorsed Draghi as the best candidate for the position.^[19] A few days later The Economist wrote that "the next president of the world's second-most-important central bank should be Mario Draghi".^[20] On 20 April 2011 The Wall Street Journal reported that "Wolfgang Schäuble, Germany's finance minister, is open to Mr. Draghi for the post of ECB President".^[21] A few days later the German newspaper Bild endorsed Draghi by defining him the "most German of all remaining candidates".^[22] Contrary to previous reports about France's position, on 25 April it was reported that President Nicolas Sarkozy saw Draghi as a full-fledged and an adequate candidate for the job.^[23][24]

Draghi with Dominique Strauss-Kahn and Jean-Claude Trichet.

On 17 May 2011 the Council of the European Union – sitting as Ecofin – adopted a recommendation on the nomination of Draghi as President of the ECB.^[25] He was approved by the European Parliament and the ECB itself^[26] and on 24 June 2011 his appointment was confirmed by the European leaders.^[27] Draghi began leading the Frankfurt-based institution when Trichet's non-renewable eight-year term expired on 31 October 2011. Draghi's term runs from 1 November 2011 to 31 October 2019.^[28] Though France long backed Draghi's candidacy, the country held up the appointment toward the end, insisting that Lorenzo Bini Smaghi, an Italian official on the ECB's six-member board, cede his post on the board to a French representative.^[27]

Concerns were also expressed during the candidacy about Draghi's past employment at Goldman Sachs.^[9][29] Pascal Canfin (MEP) asserted Draghi was involved in swaps for European governments, particularly in Greece, trying to disguise their countries' economic status. Draghi responded that the deals were "undertaken before my joining Goldman Sachs [and] I had nothing to do with them", in the 2011 European Parliament nomination hearings.^[30][31][32]

Presidency

In December 2011, Draghi oversaw a €489 billion ($640 b.), three-year loan program from the ECB to European banks. The program was around the same size as the US Troubled Asset Relief Program (2008) though still much smaller than the overall US response including the Federal Reserve's asset purchases and other actions of that time. Draghi's ECB also promptly "repealed the two foolish rate hikes made by his predecessor ...Trichet [and] ... stepped up the bond purchases from struggling euro-zone nations" to help with the debt crisis, commentator Steve Goldstein wrote in mid-January, 2012. At that time, "Draghi and all of his colleagues (the decision was unanimous) chose not to cut the price for private-sector loans [below the 1% achieved with the "repeal"], even when he forecasts inflation to fall below the targeted 2% later this year." As such, Goldstein concluded, Draghi would leave more moves to national leaders Sarkozy and German Chancellor Angela Merkel and central banks, contrasting Draghi's actions with those of the Fed's Ben Bernanke.^[33]

Mario Draghi at the World Economic Forum, in 2012.

In February 2012, Nobel prize laureate in economics Joseph Stiglitz argued that, on the issue of the impending Greek debt restructuring, the ECB's insistence that it has to be "voluntary" (as opposed to a default decreed by the Greek authorities) was a gift to the financial institutions that sold credit default insurance on that debt; a position that is unfair to the other parties, and constitutes a moral hazard.^[34]

Late in February, 2012, a second, somewhat larger round of ECB loans to European banks was initiated under Draghi, called long term refinancing operation (LTRO). One commentator, Matthew Lynn, saw the ECB's injection of funds, along with Quantitative easing from the US Fed and the Asset Purchase Facility at the Bank of England, as feeding increases in oil prices in 2011 and 2012.^[35]

In July 2012, in the midst of renewed fears about sovereigns in the eurozone, Draghi stated in a panel discussion that the ECB "...is ready to do whatever it takes to preserve the Euro. And believe me, it will be enough."^[36] This statement led to a steady decline in bond yields (borrowing costs) for eurozone countries, in particular Spain, Italy and France. In light of slow political progress on solving the eurozone crisis, Draghi's statement has been seen as a key turning point in the fortunes of the eurozone.^[37][38]

In April 2013, Draghi said in response to a question regarding membership in the eurozone that "These questions are formulated by people who vastly underestimate what the euro means for the Europeans, for the euro area. They vastly underestimate the amount of political capital that has been invested in the euro."^[39]

In 2015, in an appearance before the European Parliament Draghi said that the future of the eurozone was at risk unless member countries gave up some independence and created more Pan-European government institutions. "We have not yet reached the stage of a genuine monetary union," the central bank president, Mario Draghi, said in a speech to the European Parliament in Brussels. Failure of eurozone countries to harmonize their economies and create stronger institutions, he said, "puts at risk the long-term success of the monetary union when faced with an important shock." Mr. Draghi has often urged eurozone governments to do more to improve their economic performance, for example by overhauling restrictive labor regulations. But it was unusual for him to suggest that the future of the eurozone could depend on whether countries heed his advice.^[40]

On March 10, 2016, Draghi provoked a wave of talks on the concept of "helicopter money" after declaring at a press conference that he thinks the concept is 'very interesting':

We haven't really thought or talked about helicopter money. It's a very interesting concept that is now being discussed by academic economists and in various environments. But we haven't really studied yet the concept. Prima facie, it clearly involves complexities, both accounting-wise and legal-wise, for our view, but of course by this term "helicopter money" one may mean many different things, and so we have to see that.^[41]

Further reading

• Blackstone, Bryan; Walker, Marcus (2 October 2012). "How ECB Chief Outflanked German Foe in Fight for Euro". The Wall Street Journal. New York: Dow Jones & Company.
• Bahaa Monir,EUROPE'S DEFLATION: IMAGINATIVE RISK AND FICTIONAL POLICIES( How President Mario Draghi views Negative interest rates, Quantitative Easing Program and Deflation in Europe.) - ORCA Forex