MILAN,Italy (AP) – The former European Central Bank (ECB) chief credited with helping to save the Euro has now been tapped to lead Italy, the eurozone’s third-largest economy, out of the pandemic and the worst recession since World War II.
Mario Draghi gained global respect as the head of the European Central Bank for eight years, managing monetary policy for the 19 countries that use the euro, with an economy worth 12 trillion euros (US$14.4 trillion).
Draghi, 73, not only has an insider’s grasp of the financial rule book that Italy must follow, but he has the respect of those whose forbearance Italy may require during the difficult months and years ahead.
“When Draghi picks up the phone to call the White House, President Joe Biden will answer. Because it is Mario Draghi,” the deputy manager of the leading Milan daily Corriere della Sera, Daniele Manca, said yesterday. “The same goes for [German Chancellor] Angela Merkel and [Chinese President] Xi Jinping.”
A seasoned treasury official who became Italy’s and then Europe’s top central banker, Draghi brings gravitas, crisis management, and market savvy to the job of governing Italy out of a pandemic and the resulting economic crisis.
President Sergio Mattarella tapped him to form a broad-based Government after squabbling among Italy’s coalition parties over the virus response led Premier Giuseppe Conte to resign.
Speaking yesterday at the presidential palace in Rome, Draghi listed the priorities facing Italy: “overcoming the pandemic, completing the vaccine campaign, offering responses to citizens’ daily problem, relaunch the country”.
Financial markets welcomed the prospect of a Draghi Government. Italy’s borrowing costs on its debt, the second-highest in relation to gross domestic product (GDP) in Europe, sank, while stocks rallied two per cent. One financial analyst summed up the sentiment with the subject line: “We like Mario Draghi!”
Draghi is not afraid of venturing bold solutions to big problems. When the eurozone was facing a crisis of confidence in 2012, he famously told a conference in London that the ECB would do “whatever it takes to preserve the Euro. And believe me, it will be enough”. That promise, backed with new ECB policies, helped stabilise markets that threatened to break up the euro.
He took a pragmatic approach during the financial crisis. He expanded the range of the ECB’s stimulus policies to include large-scale bond purchases. He also oversaw the ECB’s move to become the main banking supervisor after failing banks played a key role in the eurozone’s troubles.
His recent tenure leading the ECB, ending October 31, 2019, positions him well to help Italy navigate its difficulties, and also some 200 billion euros in EU recovery funds.
If Italy needs to tap the ECB’s bond market backstop, which aims to keep Euro countries’ sovereign borrowing costs from spiking to unaffordable levels, there’s no one better than Draghi: He oversaw the backstop’s design and unveiling in 2012.
He would also be intimately familiar with the complexities of the European bailout fund created during the eurozone debt crisis.
Draghi joined the ECB as its third chief in 2011, just as Italy was engulfed in a debt crisis. As ECB president-designate, Draghi and then ECB head Jean-Claude Trichet intervened in Italian politics through an August 2011 letter to then Premier Silvio Berlusconi demanding reforms to cut the deficit, improve growth and deal with a financial markets crisis that threatened to break up the Euro.