May 12, 2011

Draghi Is in Poll Position

A former Goldman Sachs banker and the current Governor of the Banca d’Italia, Mario Draghi is now in pole position in the race for the European Central Bank’s presidency. In fact, besides having been already endorsed by French president Nicolas Sarkozy, he has been given an official blessing by German Chancellor Angela Merkel: “I know Mario Draghi,” she told Die Zeit newspaper, “he is a very interesting and experienced individual … Germany could support a candidacy from him for the office of the ECB president ... He stands very close to our agenda of stability and solid economics.”

However, three weeks ago Germany’s finance minister Wolfgang Schäuble was reported by The Wall Street Journal to have said that he was “open to Mr. Draghi for the post of ECB President.” And a few days later the German newspaper Bild defined him as the “most German of all remaining candidates.”Furthermore, back on February 13th, Wolfgang Münchau, associate editor of the Financial Times, endorsed Draghi as the best candidate for the job, and a few days later The Economist wrote that “the next president of the world’s second-most-important central bank should be Mario Draghi.”

Barclays Capital managing director Julian Callow told AFP that Merkel’s backing was indeed “the last box to check.” Draghi, he said, “has the intellect, the experience, the leadership, the judgement, the communication skills that (would) collectively make him an exceptional president of the ECB.”

Of course, we Europeans, all of us (especially here in Italy), hope all the above are right, even though all of them proved themselves anything but infallible—and we experienced this at first hand. Eurozone leaders are expected to agree in June as to who will follow Jean-Claude Trichet’s eight-year term.


  1. He can only be better than Trichet, who for the whole of his term has never ceased to play with the interest rates as though the euro were a yo-yo.
    When it was launched the euro against the £ sterling was 1.50. Today it's 1.14. At one time it was on a level parity with the £. The euro is still overvalued, certainly against the dollar, but this seems to have always been Trichet's goal. One suspects that his objective was to substitute the dollar on the international market with the euro. As far as petrol dollars are concerned, he succeeded, I believe, only regarding Iran. But over-valuing the euro (following the classic bundesbank strong money policy) might be ok for Germany, but it's bad news, especially for the southern exporting countries, certainly Greece, Spain and Portugal, and it's never been good for France, Italy and out on a limb Ireland.

    Assuming Draghi gets the post, and he thinks more in terms of what's good for Europe, and not just what's good for Germany, with any other 'personal' worldly ambitions, the rest of Europe will no doubt sign with grateful relief.

  2. The Economist, Feb 17th 2011:

    "What does it take to run the ECB? Top of the list is the technical expertise and track record to be a credible guardian against inflation. The ECB’s job, as laid out in its mandate, is to maintain price stability, and its president must both lead that effort and be its public face. But being sound on inflation, while necessary, is no longer enough. In the wake of the financial crisis central banks are shifting to a broader focus on “macroprudential supervision” (see article). Tomorrow’s central bankers will need to understand the complexities of financial markets and regulation better than their predecessors. Lastly, the ECB’s president, perhaps more than others, needs diplomatic deftness, both to steer and then represent a consensus on the bank’s 23-member governing council as well as to work with—and stand up to—Europe’s fractious politicians.

    Add these requirements up and Mr Draghi’s résumé stands out. He is an economist with stacks of experience in central banking and government finance, plus a four-year stint in the private sector. In addition to running Italy’s central bank, he is chairman of the Financial Stability Board, the regulators’ club spearheading international reforms of financial rules. No other candidate’s CV can match his. Klaus Regling, the German head of the European Financial Stability Facility, has never been a central banker. Erkki Liikanen, head of Finland’s central bank, lacks financial and regulatory experience."

  3. @Mirino:

    I couldn't agree more with you... but he is regarded by many in Germany as “the most German of all remaining candidates.”

  4. As far as I can remember (before Google's technical problem) my comment read, more or less-
    It wouldn't be too difficult to do better than Monsieur Trichet, who has never stopped playing with the interest rates of the euro as though it were a yo-yo. He has systematically followed the classic, bundesbank economic policy, which, although a strong money might be favoured by Germany, it's bad news for southern, exporting countries such as Greece, Spain, Portugal and out on a limb Ireland. It's not good for Italy or France either.

    One has always had the impression that Mr.Trichet's tacit ambition was to substitute the dollar with the euro as an international money. I believe he succeeded regarding Iran, but most of OPEC has remained loyal to the petrol dollar, which, for world economy, is just as well.

    If Mario Draghi is nominated and consequently gives priority to the interests of Europe as a whole, instead of first and foremost to those of Germany or to any other more irresponsible 'personal worldly ambitions', Europe will certainly sigh with relief, and the European economy will be refreshingly boosted. By extention it will also have an internationally positive consequence.

    During possibly the worst economical crisis in history, the ECB under Trichet was the last to reluctantly lower the euro's interest rates, and the first to less reluctantly raise them. When it was launched, the rate of the euro against the £ sterling (which as a reference is relatively stable) was 1.50. At one point the euro gained in value to the rate of almost equal parity to the £. Today the rate is 1.14 which means it's still over valued, especially in relation to the dollar.

    Had the ECB assumed it's responsibility in keeping with the interests of Europe as a whole, perhaps the extremely costly consequences in Greece, Portugal and Ireland could have been avoided, if not anticipated and thus absorbed more effectively.