Mario Draghi

Mario Draghi
OMRI
President of the European Central Bank
Assumed office
1 November 2011
Vice President Vítor Constâncio
Preceded by Jean-Claude Trichet
Chairman of the Financial Stability Board
In office
2 April 2009 – 4 November 2011
Preceded by Position established
Succeeded by Mark Carney
Governor of the Bank of Italy
In office
29 December 2005 – 31 October 2011
Preceded by Antonio Fazio
Succeeded by Ignazio Visco
Personal details
Born (1947-09-03) 3 September 1947
Rome, Italy
Alma mater Sapienza University of Rome
Massachusetts Institute of Technology
Signature

Mario Draghi OMRI (Italian pronunciation: [ˈmaːrjo ˈdraːɡi]; born 3 September 1947) is an Italian economist, manager and banker who succeeded Jean-Claude Trichet as the President of the European Central Bank on 1 November 2011.

Draghi previously worked at Goldman Sachs from 2002 until 2005 before becoming the governor of the Bank of Italy in December 2005, where he served until October 2011. In 2014 Draghi was listed as the 8th most powerful person in the world by Forbes. In 2015 Fortune magazine ranked him as the world's second greatest leader.[1]

Early life and career

He was born in Rome. His father Carlo joins Banca d'Italia in 1922, later IRI and in the end Banca Nazionale del Lavoro. His mother, Gilda Mancini is a pharmacist. Mario is first of three children: Andreina, art historian, and Marcello, entrepreneur. He studied at the Massimiliano Massimo Institute[2] and graduated from La Sapienza University under the supervision of Federico Caffè with his thesis titled Economic integration and exchange rates changes. Then he earned a PhD in economics from the Massachusetts Institute of Technology in 1976 with his thesis titled Essays on economic theory and applications, under the supervision of Franco Modigliani and Robert Solow.[3] He was full professor at the Cesare Alfieri Faculty of Political Science of the University of Florence from 1981 until 1994[4] and fellow of the Institute of Politics at the John F. Kennedy School of Government, Harvard University (2001).

From 1984 to 1990 he was the Italian Executive Director at the World Bank. In 1991, at the initiative of the then Minister Guido Carli, he became general director of the Italian Treasury, and held this office until 2001.[5] During his time at the Treasury, he chaired the committee that revised Italian corporate and financial legislation and drafted the law that governs Italian financial markets.[6] He is also a former board member of several banks and corporations (Eni, Istituto per la Ricostruzione Industriale,[7] Banca Nazionale del Lavoro and IMI).

Draghi was then vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee (2002–2005).[8]

Draghi is a trustee at the Institute for Advanced Study in Princeton, New Jersey and also at the Brookings Institution, in Washington, D.C.[6]

In his capacity as Bank of Italy governor, he was a member of the Governing and General Councils of the European Central Bank and a member of the Board of Directors of the Bank for International Settlements. He is also governor for Italy on the Boards of Governors of the International Bank for Reconstruction and Development and the Asian Development Bank.[9]

In December 2005 Draghi was appointed Governor of the Bank of Italy,[10] and in April 2006 he was elected Chairman of the Financial Stability Forum; this organization which became Financial Stability Board in April 2009 on behalf of the G20, bringing together representatives of governments, central banks and national supervisors institutions and financial markets, international financial institutions, international associations of regulatory authorities and supervision and committees of central bank experts.[11] It aims to promote international financial stability, improve the functioning of markets and reduce systemic risk through information exchange and international cooperation between supervisors.

On 5 August 2011 he wrote, together with the immediate past governor of the ECB, Jean Claude Trichet, a letter to the Italian government to push for a series of economic measures that would soon be implemented in Italy.[12]

European Central Bank

Candidacy

Draghi was frequently mentioned as a potential successor to Jean-Claude Trichet, whose term as President of the European Central Bank ended in October 2011.[13] Then, in January 2011, German weekly newspaper Die Zeit reported, with reference to high-ranking policy-makers in Germany and France, that it is "unlikely" that Draghi will be picked as Trichet's successor.[14] However, in February 2011 the situation became further complicated when the main German candidate, Axel Weber, was reported to be no longer seeking the job, reviving the chances of the other candidates.[15] On 13 February 2011 Wolfgang Münchau, associate editor of the Financial Times, endorsed Draghi as the best candidate for the position.[16] A few days later The Economist wrote that "the next president of the world’s second-most-important central bank should be Mario Draghi".[17] On 20 April 2011 The Wall Street Journal reported that "Wolfgang Schäuble, Germany's finance minister, is open to Mr. Draghi for the post of ECB President".[18] A few days later the German newspaper Bild endorsed Draghi by defining him the "most German of all remaining candidates".[19] Contrary to previous reports about France's position, on 25 April it was reported that President Nicolas Sarkozy saw Draghi as a full-fledged and an adequate candidate for the job.[20][21]

Draghi with Dominique Strauss-Kahn and Jean-Claude Trichet.

On 17 May 2011 the Council of the European Union – sitting as Ecofin – adopted a recommendation on the nomination of Draghi as President of the ECB.[22] He was approved by the European Parliament and the ECB itself[23] and on 24 June 2011 his appointment was confirmed by the European leaders.[24] Draghi began leading the Frankfurt-based institution when Trichet's non-renewable eight-year term expired on 31 October 2011. Draghi's term runs from 1 November 2011 to 31 October 2019.[25] Though France long backed Draghi's candidacy, the country held up the appointment toward the end, insisting that Lorenzo Bini Smaghi, an Italian official on the ECB's six-member board, cede his post on the board to a French representative.[24]

Concerns were also expressed during the candidacy about Draghi's past employment at Goldman Sachs.[8][26] Pascal Canfin (MEP) asserted Draghi was involved in swaps for European governments, particularly in Greece, trying to disguise their countries' economic status. Draghi responded that the deals were "undertaken before my joining Goldman Sachs [and] I had nothing to do with them", in the 2011 European Parliament nomination hearings.[27][28][29]

Presidency

In December, 2011, Draghi oversaw a €489 billion ($640 b.), three-year loan program from the ECB to European banks. The program was around the same size as the US Troubled Asset Relief Program (2008) though still much smaller than the overall US response including the Federal Reserve's asset purchases and other actions of that time. Draghi's ECB also promptly "repealed the two foolish rate hikes made by his predecessor ...Trichet [and] ... stepped up the bond purchases from struggling euro-zone nations" to help with the debt crisis, commentator Steve Goldstein wrote in mid-January, 2012. At that time, "Draghi and all of his colleagues (the decision was unanimous) chose not to cut the price for private-sector loans [below the 1% achieved with the "repeal"], even when he forecasts inflation to fall below the targeted 2% later this year." As such, Goldstein concluded, Draghi would leave more moves to national leaders Sarkozy and German Chancellor Angela Merkel and central banks, contrasting Draghi's actions with those of the Fed's Ben Bernanke.[30]

Mario Draghi at the World Economic Forum, in 2012.

In February 2012, Nobel prize laureate in economics Joseph Stiglitz argued that, on the issue of the impending Greek debt restructuring, the ECB's insistence that it has to be "voluntary" (as opposed to a default decreed by the Greek authorities) was a gift to the financial institutions that sold credit default insurance on that debt; a position that is unfair to the other parties, and constitutes a moral hazard.[31]

Late in February, 2012, a second, somewhat larger round of ECB loans to European banks was initiated under Draghi, called long term refinancing operation (LTRO). One commentator, Matthew Lynn, saw the ECB's injection of funds, along with Quantitative easing from the US Fed and the Asset Purchase Facility at the Bank of England, as feeding increases in oil prices in 2011 and 2012.[32]

In July 2012, in the midst of renewed fears about sovereigns in the Eurozone, Draghi stated in a panel discussion that the ECB "...is ready to do whatever it takes to preserve the Euro. And believe me, it will be enough."[33] This statement led to a steady decline in bond yields (borrowing costs) for Eurozone countries, in particular Spain, Italy and France. In light of slow political progress on solving the Eurozone crisis, Draghi's statement has been seen as a key turning point in the fortunes of the Eurozone.[34]

In April 2013, Draghi said in response to a question regarding membership in the Eurozone that "These questions are formulated by people who vastly underestimate what the euro means for the Europeans, for the euro area. They vastly underestimate the amount of political capital that has been invested in the euro."[35]

In 2015 in an appearance before the European Parliament Draghi said that the future of the eurozone was at risk unless member countries gave up some independence and created more Pan-European government institutions. “We have not yet reached the stage of a genuine monetary union,” the central bank president, Mario Draghi, said in a speech to the European Parliament in Brussels. Failure of eurozone countries to harmonize their economies and create stronger institutions, he said, “puts at risk the long-term success of the monetary union when faced with an important shock.” Mr. Draghi has often urged eurozone governments to do more to improve their economic performance, for example by overhauling restrictive labor regulations. But it was unusual for him to suggest that the future of the eurozone could depend on whether countries heed his advice.[36]

On March 10, 2016, Draghi provoked a wave of talks on the concept of "helicopter money" after declaring at a press conference that he thinks the concept is 'very interesting':[37]

We haven't really thought or talked about helicopter money. It's a very interesting concept that is now being discussed by academic economists and in various environments. But we haven’t really studied yet the concept. Prima facie, it clearly involves complexities, both accounting-wise and legal-wise, for our view, but of course by this term “helicopter money” one may mean many different things, and so we have to see that.

Criticism

Draghi is a member of the Group of Thirty founded by the Rockefeller Foundation. The Group of Thirty is a private group of lobbyists in the finance sector.[38][39] For this reason he is accused of having a conflict of interest as president of the ECB. Some parties also see Draghi's former work at Goldman Sachs as a conflict of interest.[40][41][42][43]

Beginning in 2013 Draghi was criticised in the context of the scandals rising around the bank Banca Monte dei Paschi di Siena (MPS)[44] which was making very risky deals.[45]

On 15 April 2015, during the live monthly press conference, Draghi was heckled by a female protester, Josephine Witt, who was wearing a T-shirt proclaiming "End ECB dick-tatorship".[46][47][48]

Awards and honors

Knight Grand Cross of the Order of Merit of the Italian Republic – awarded on 5 April 2000[49]

References

  1. ↑ "Worlds Greatest Leaders" Fortune Magazine. Retrieved 15 April 2015.
  2. ↑ "I compagni di classe del nuovo Governatore" (in Italian). corriere.it. Retrieved 5 September 2012.
  3. ↑ http://dspace.mit.edu/bitstream/handle/1721.1/54263/04184143.pdf?sequence=1
  4. ↑ "Bank of Italy – Mario Draghi". Bancaditalia.it. Archived from the original on 8 October 2011. Retrieved 26 June 2011.
  5. ↑ Subrata Ghatak; John N. Kallianiotis; José Roberto Sánchez-Fung (3 October 2013). Exchange Rates and International Financial Economics: History, Theories, and Practices. Palgrave Macmillan. p. 48. ISBN 978-1-137-31888-6.
  6. 1 2 David A Dieterle Ph.D. (8 August 2013). Economic Thinkers: A Biographical Encyclopedia: A Biographical Encyclopedia. ABC-CLIO. pp. 67–. ISBN 978-0-313-39747-9.
  7. ↑ "Germany gives green light to Draghi". LifeinItaly.com. 11 May 2011. Retrieved 25 June 2011.
  8. 1 2 Foley, Stephen (18 November 2011). "What price the new democracy? Goldman Sachs conquers Europe". London: The Independent. Retrieved 18 November 2011.
  9. ↑ Federal Reserve Bank of Kansas City. Symposium; Federal Reserve Bank of Kansas City (2009). Maintaining stability in a changing financial system: a symposium. The Bank. p. xiii.
  10. ↑ Nomi Prins (2 October 2009). It Takes a Pillage: An Epic Tale of Power, Deceit, and Untold Trillions. John Wiley & Sons. p. 89. ISBN 978-0-470-55550-7.
  11. ↑ Juan Fernández de Guevara Radoselovics; José Pastor Monsálvez (29 November 2012). Crisis, Risk and Stability in Financial Markets. Palgrave Macmillan. p. 94. ISBN 978-1-137-00183-2.
  12. ↑ Jean Pisani-Ferry (2014). The Euro Crisis and Its Aftermath. Oxford University Press. p. 183. ISBN 978-0-19-999333-8.
  13. ↑ Kort, Katharina (29 September 2009). "Super-Mario für die EZB". Handelsblatt
  14. ↑ "German paper says Draghi's ECB chances diminishing". Reuters. 19 January 2011.
  15. ↑ Kennedy, Simon; Neuger, James G. (19 January 2011). "Weber's Withdrawal Throws Open ECB Race as European Debt Crisis Persists". Bloomberg.
  16. ↑ "Draghi can lead the eurozone out of danger". Financial Times. 13 February 2011.
  17. ↑ "The Italian's Job". The Economist. 17 February 2011.
  18. ↑ Blackstone, Brian (20 April 2011). "Italian Gains Support in Central Bank Race". The Wall Street Journal.
  19. ↑ "So deutsch ist der neue EZB-Chef". Bild. 29 April 2011.
  20. ↑ Fouquet, Helene (25 April 2011). "Draghi Said to Be Seen by Sarkozy as Trichet's Successor". Bloomberg.
  21. ↑ "Mario Draghi, bien parti pour prendre la présidence de la BCE". Le Monde. 27 April 2011.
  22. ↑ "Draghi Appointed ECB Chief", Wall Street Journal, 16 May 2011.
  23. ↑ "Mario Draghi appointed as head of European Central Bank". BBC. 24 June 2011. Retrieved 24 June 2011.
  24. 1 2 Galloni, Alessandra, and William Horobin (24 June 2011). "Draghi appointed ECB chief (intro-only without subscription)". The Wall Street Journal.
  25. ↑ Watts, William L. (24 June 2011). "EU leaders confirm Draghi to head ECB". MarketWatch.
  26. ↑ "EU appoints Draghi to ECB, Bini Smaghi to leave". Reuters. 24 June 2011. Retrieved 24 June 2011.
  27. ↑ Draghi Says He Knew Nothing About Goldman-Greece Deal, bloomberg.com, June 14, 2011
  28. ↑ "EuroparlTV video: Interview: 'Mario Draghi didn't convince me' – Pascal Canfin, MEP". Europa (web portal). 15 June 2011. Retrieved 26 June 2011.
  29. ↑ "Hearing of Mario Draghi nominated to take over the European Central Bank 14-06-2011". Europa (web portal) (in French). Archived from the original on 29 June 2011. Retrieved 26 June 2011.
  30. ↑ Goldstein, Steve, "Unlike Bernanke, Draghi doesn’t aim to be hero", MarketWatch opinion, 12 January 2012 11:06 am EST. Retrieved 2012-01-12.
  31. ↑ Stiglitz, Joseph (February 2012). "Capturing the ECB". project-syndicate.org. Project Syndicate. Retrieved February 2012. In fact, the ECB may be putting the interests of the few banks that have written credit-default swaps before those of Greece, Europe’s taxpayers, and creditors who acted prudently and bought insurance.
  32. ↑ Lynn, Matthew, "What central banks provide, oil markets take away", MarketWatch, 29 February 2012. Retrieved 2012-02-29.
  33. ↑ Euronews: Whatever it takes on YouTube, 26 July 2012. Retrieved 2012-12-17.
  34. ↑ "A year after Draghi's pledge to do whatever it takes", Market Watch, 26 July 2013. Retrieved 2013-12-17.
  35. ↑ Boesler, Matthew, "MARIO DRAGHI: Zero Hedge Readers Don't Understand The Euro Crisis" Business Insider dateline 4 Apr. 2013
  36. ↑ Eurozone’s Future Remains at Risk, Mario Draghi Warns
  37. ↑ https://www.ecb.europa.eu/press/pressconf/2016/html/is160310.en.html
  38. ↑ Board of Directors des BIZ: Mario Draghi
  39. ↑ Official members of the Group of Thirty : Mario Draghi
  40. ↑ Ombudsmann assesses Draghi's membership in lobby organizations In: Spiegel.de of 30. Juli 2012
  41. ↑ Head of ECB criticised for his membership in the G30 In: Tagesschau.de of 31. Juli 2012
  42. ↑ Jérôme Fritel, Marc Roche: Goldman Sachs – A bank rules the world. ARTE, Frankreich 2012, 71 Minuten, looked up on 4. September 2012
  43. ↑ Günther Lachmann: How the Greeks sneaked their way into the Euro, looked up on 12. Dezember 2012
  44. ↑ Oldest bank of the World Monte dei Paschi: Scandal involves ECB director Draghi - SPIEGEL ONLINE
  45. ↑ Europe at the verge of currency wars in: manager-magazin.de of 30. November 2014
  46. ↑ "European Central Bank President Mario Draghi Attacked By Protester". Sky News. Retrieved 15 April 2015.
  47. ↑ Heather Stewart (15 April 2015). "‘End ECB dick-tatorship’: woman disrupts Draghi speech, throws paper at officials". The Guardian (Guardian News and Media Limited). Archived from the original on 16 April 2015. Retrieved 29 February 2016.
  48. ↑ Draghi at Witt's end after protester crashes ECB press briefing. Fortune, 15 April 2015.
  49. ↑ Draghi, Prof. Mario, "Cavaliere di Gran Croce ...", Presidenza della Repubblica webpage.
  50. ↑ Laurea honoris causa al prof. Mario Draghi
  51. ↑ I Master cuoa honoris causa

Further reading

External links

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Business positions
Preceded by
Antonio Fazio		 Governor of the Bank of Italy
2005–2011 		Succeeded by
Ignazio Visco
New office Chairman of the Financial Stability Board
2009–2011 		Succeeded by
Mark Carney
Preceded by
Jean-Claude Trichet		 President of the European Central Bank
2011–present 		Incumbent
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