Mario Draghi at the ECB : Mission “Save the Eurozone”

, by Alessio Pisanò

Mario Draghi at the ECB : Mission “Save the Eurozone”
Mario Draghi, Governor of the Bank of Italy and Chairman of the Financial Stability Board Credit © European Union, 2011

Mario Draghi has been appointed as the new Director of the European Central Bank (ECB). After months of mutterings, the European leaders agreed on Mr Draghi leading the most important financial body in Europe currently run by Jean-Claude Trichet.

Mr Draghi is expected to enter into office next November after the formal appointment by the European Council on June 24 and the examination by the European Parliament which is due to express a non-compelling opinion next months.

The nomination of Mr Draghi, currently Governor of the Banca d’Italia, was taken for granted as no other candidates stand for the post at the ECB. Ahead of the Eurogroup meeting which gave its green light to Mr Draghi, there was in whispers his candidature at the International Monetary Fund (IMF) after the fall-out of Dominique Strauss-Kahn charged with sex assault in New York on May 18. Mr Draghi’s spokesperson made clear once and for all that the Italian banker was not at all interested in the IMF despite international allegations.

The new ECB Director is expected to face a challenging economic situation throughout Europe on the scope of avoiding the Euro system collapse. First of all he will have to force on European political agenda the establishment of the new rescue fund in response to national crisis. As news of a possible failure of Greece came out, the ECB has been promptly called for a second bailout of several billions Euros and a restructuring of the sovereign debt. At stake is nothing less than the Eurozone stability, according experts who strongly object to further delay a second intervention to Greece and blame the EU turning a blind eye on the situation.

This is why economists are eager to see Mr Draghi take office hoping he will be up to his job. For the time being, he has both the experience and the credibility to accomplish to the task to let Europe walk out of the crisis. Critics, by contrast, fear that Mr Draghi is too bound up with his native country’s problems to demand other Southern countries tighten up their expenditures and sign up to stricter economic policies. Some is wary of Mr Draghi change of heart on austerity measures and orthodoxy economy. In so far the Italian Governor has been reported to be loath to assure unconditional bailout to countries in crisis without they agree on being on track of more privatisation and social expenditure cuts.

Under Trichet’s presidency, the ECB responded to the financial and eurozone crises by offering unlimited liquidity to banks, instituting a disputed programme to buy sovereign bonds and easing the collateral requirements it sets for loans. Mr Draghi however looks to believe the time for the Eu to flex its muscles has come. Asked what his response to the second bailout to Greece would be, he stated that countries packed with debts cannot go on dragging their feet over the Eurozone stability.

His strong position on Greece is likely to have prompted Germany to agree on Mr Draghi appointment at the ECB instead of Bundesbank chief Jens Weidmann expected to succeed to Trichet. Chancellor Angela Merkel has back down Weidmann candidature after acknowledging Mr Draghi was to stiffen European rules for loans and rescue packages. The ECB has now to play all its leverage to urge countries in crisis to intervene before they further fall short of revenues in so doing watering down all the ECB efforts in so far. But miracles are out reach for Mr Draghi.

The fall-out of Dominique Strauss-Kahn (DSK) at the Imf is not helping at all as Europe is running the risk to lose the leadership of the Fund for the first time since it was established. DSK has played an important role in assisting the ECB in helping countries in crisis such as Greece, Ireland and lately Portugal. If the IMF chair was given to a representatives of a developing country, Europe would lose is gripe on the Fund priorities and Mr Draghi would be alone in coping with a unprecedented economic crisis which is more and more gathering momentum affecting all the Eurozone stabilty and, perhaps, future.

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