The Markets Place New Dragons at the ECB

Mario Draghi [1] takes the chair of ECB president on Tuesday, November the first due to France’s veto of the German candidate Axel Weber, who was judged “too rigid”, to Silvio Berlusconi’s fear of the possible competition of a government of “technicians” and above all, to his image, so unlike Peninsular stereotypes - often accused, by some of their Northern “partners”, of being too lax in finance.

A stern man, strict, secretive, and a hard-worker, he is defined by the Anglo-Saxon press as being “un-Italian” and has the special favour of European financial markets. In Italy he worked his way up as Director General of the Treasury between 1991 and 2001, at a time when under the Maastricht treaty, privatizations and budgetary austerity were already a must. He served successively under Leftist or “technical” governments as well as under Silvio Berlusconi. Moreover, he managed to restore the credibility of the Italian Bank, in dire straights after 2006 and the scandal of Antonio Fazio’s governance. So much so that he was appointed president of the Financial Stability Board set up by the G20. From then on he was “Super Mario, haloed with a legend all the more persistent because he seldom confides anything to the media.

Mario Draghi, a brilliant senior public servant of the Italian State, an alumnus of the prestigious Jesuit school in Rome, apparently claims to be indifferent to political games. Unlike Carlo Azeglo Ciampi, governor of the Institute, then head of a “technical” government between 1993 and 1994, then president of the Republic from 1999 to 2006, Draghi did not make a career at the Italian Bank.

He is first and foremost an Italian whose career took place largely between the US and London. He finished off his schooling at MIT in Cambridge, MA, at the court of Nobel prize-winner Franco Modigliani, and worked in Washington as executive head of the World Bank (1984-1990). The henchman of markets and of the US, he conquered the London City when he was vice-president and European manager of Goldman Sachs, one of the biggest US banks, between 2002 and 2005. He is on intimate terms with Washington’s current Treasury Secretary Tim Geithner and the FED’s president Ben Bernanke. More recently he took great pains to give Angela Merkel enough tokens of goodwill to persuade her that despite his being Italian he would keep the ECB on its track and would watch relentlessly for the slightest inflationary twitch.

It little matters that Goldman Sachs, from 2000 onwards, helped the Greek authorities to fiddle Greek public accounts in order to gain access to the euro zone: during his vetting session before the European parliament last June, “Super-Mario” defended himself saying that the contracts in question had been signed before he joined the US bank and that he had played no part in their follow-up management. In other words Goldman Sachs’ representative in Europe was not informed of one of his bank’s greatest operations on the Old Continent.

As president of the ECB it will be Draghi’s responsibility to implement EU “support” to Greece and other sovereign-risk countries, including his own, along the same lines as his predecessor Jean-Claude Trichet. Even before he settled down in Francfort he co-signed with Trichet a letter “ordering” Berlusconi’s government to bring the deficit down to zero by 2013 through draconian measures like wage cuts in the public sector and the easing of dismissal procedures.

He has become the target of the Peninsula’s Indignados movement, which mobilized over 100 000 people in the streets of Rome on October 15 when violent clashes took place. Some of the young demonstrators, students, and workers with precarious jobs, presented themselves as “Draghi ribelli” (rebellious dragons), making a pun on the central banker’s surname, and so pointing in irony at his function: to impose his directives on the institutions of a supposedly sovereign country.