PROFILE: MARIO DRAGHI:When Mario Draghi takes over as head of the European Central Bank in six weeks, his response to the economic storm in his Italian homeland will tell us what we can expect in this country too
IT WAS A QUESTION of body language. When the current Bank of Italy governor and soon-to-be president of the European Central Bank (ECB), Mario Draghi, sat beside the Italian prime minister, Silvio Berlusconi, at a news conference in Rome’s Government House last week, it was hard to resist the impression that the banker felt less than comfortable with the media tycoon.
Of course, the two men could hardly be more different. The conservative, understated, low-profile Draghi has convinced even critics such as the popular German daily, Das Bild, that he is a man with his "feet on the ground". The flamboyant, overstated, over-worded and over-wealthy Berlusconi touches the ground only when he intends to buy the terrain in question.
Draghi is famous for travelling modestly, sometimes in the family car driven by his wife, Serena, or on a second-class train ticket or on certain well-known low-cost airlines. Berlusconi, on the contrary, has been gadding about in either his private jet or his private helicopter (now, of course, he uses government vehicles) for 30 years. As for their private lives, do we have to spell it out? Draghi is as squeaky-clean as they come, so low-profile that he is off the map. Whereas Berlusconi . . . well, the less said the better.
However, the differences between Draghi and Berlusconi concern much more than lifestyle choices. The reality is that it would be hard to imagine a more difficult and delicate moment for an Italian to find himself in control of Europe’s central bank. At the very moment in November that Draghi is set to take over from the Frenchman Jean-Claude Trichet, his own country is likely be one of the first problems to cross his desk.
If Italy is still lurching along come November, will he continue the recent ECB policy of buying government bonds to help troubled euro-zone debtor states, including Italy? Or will he want to reassure the European Union with a Prussian-style display of fiscal rectitude that ignores the storm brewing over his troubled homeland? If he chooses the latter course, it would signal that the new man is not going to be all that sympathetic to the prodigal sons in his fold, such as Ireland.
Following last week’s resignation from the ECB board of the German heavyweight policymaker Jürgen Stark, there are commentators who argue that Draghi is now under increased pressure to walk the steep and thorny path of fiscal righteousness. Given that Stark is widely believed to have resigned in protest at the ECB’s buying of government bonds (Italian bonds included), will the new man in charge feel honour-bound to reassure markets and governments (especially the German government) by steering a rigidly orthodox no-digouts line? Is it possible that, as he sat listening to Berlusconi last week, Draghi was already foreseeing future conflicts with the current Italian government?
It is remarkable that, at this moment of all moments, an Italian should be called on to lead Europe’s central bank. Given that the Italian economy boasts almost zero growth, a 120 per cent debt-to-GDP ratio and 27 per cent youth unemployment, it can hardly be held up as a role model. Given, too, that few in Italian public life are distinguished by their economic orthodoxy, why pick an Italian?
The answer is that if you’re looking for a sober, serious and capable Italian, complete with an impressive international track record, then 63-year-old Mario Draghi is your man. Furthermore, he may well prove to be just what is required when it comes to re-establishing Italy’s international credibility, a commodity that has taken the odd knock in recent times.
When speculation about Draghi getting the ECB job was first heard early this year, the news prompted some negative German reactions. Das Bildran a headline of "Mamma mia" in response to the idea, adding that inflation and Italians go together like "tomato sauce and pasta". In the end Das Bildbacktracked on that position, welcoming Draghi instead as the "silent, down-to-earth Italian". To compensate for its previous criticism, the newspaper even ran a photomontage of Draghi in a Prussian-style spiked helmet over the headline: "The new ECB boss is so German."
What is certain about Draghi is that he does appear to tick many of the required boxes for the ECB job. A PhD graduate in economics from the Massachusetts Institute of Technology, he has a glittering curriculum vitae including a decade as director general of the Italian treasury, six years as a director of the World Bank, three years with Goldman Sachs and chairmanship of the international Financial Stability Board, not to forget his current job as head of the Bank of Italy.
Furthermore, it seems clear that his ECB appointment owes more to his impressive track record than it does to sponsorship by his homeland. Just two years ago, when Berlusconi was caught up in the throes of one of his many scandals, media speculation was rife that the Berlusconi government might fall, to be replaced by a “technical” executive led by, yes, Mario Draghi. One suspects that such speculation was enough to cause a chill in relations between Draghi and Berlusconi.
Draghi could not be more different in his public behaviour from his famous compatriot. In the fashionable Parioli area of Rome, where he lives, he is often seen out shopping and queuing at the local market (he is reportedly an excellent cook). He does not smoke, he drinks just one glass of red wine a day, and he keeps fit in the gym.
Inevitably, in our parochial way, we would like to know what the appointment of Draghi means for Ireland. Most commentators would suggest that, in fact, it means little, as initially, and probably for longer, he will follow the policies laid down by his predecessor, Jean-Claude Trichet.
Gianluca Verzelli, of the Milan-based Akros Bank (part of the BPM group), is succinct. For Ireland the appointment means “nothing, no change”. In other words, it will be a question of business as usual, with the ECB acting as it has done for the past three stormy years of Irish economic crisis. The ECB under Draghi will not be any more or less sympathetic.
Verzelli does not attribute a huge significance to the Jürgen Stark resignation, arguing that Draghi’s vision and economic views follow on perfectly from those of Trichet. Many commentators would suggest that Draghi is more at his ease sitting round a table with Trichet, David Cameron or Nicolas Sarkozy than he was when he sat alongside Berlusconi at that news conference last week. He clearly has a much wider worldview than many of the leading players on the Italian political scene.
Draghi will look more than favourably on this week’s events, which saw the ECB joining forces with the central banks of Britain, the US, Japan and Switzerland to reintroduce three-month dollar-liquidity operations in the fourth quarter. This may not mean much to the non-expert ear, but if fits in with the Draghi (and Trichet) view that this is the time for all hands on deck, euro zone or otherwise.
Like Trichet, too, Draghi is almost certain to do all in his power to ensure that Greece does not default. Such a default, they both feel, would be bad news for everyone.
Over to you, Mario.
Curriculum vitae
Who is he?The Bank of Italy governor who this summer was appointed as successor to the Frenchman Jean-Claude Trichet as head of the European Central Bank (ECB).
Why is he in the news?Because in six weeks' time he is due to take over at the ECB, precisely at the moment when there are serious concerns both about the stuttering economy of his native land and about the Berlusconi government's ability to steer Italy out of a potential crisis.
Most appealing characteristicsUnderstated, serious, low-profile.
Least appealing characteristicHis public speaking is not exactly rock'n'roll.
Least likely to say"Hey, folks, I am about to turn around the euro-zone economy and save you all."
Most likely to say"Euro-zone governments need to act 'quickly and severely' to deal with their debt crisis.
