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world news Diahuebs 4 Februari 2021

Draghi brings market savvy, gravitas to tame Italy's crises

(AP) — The former European
Central Bank chief credited with
helping to save the euro has now
been tapped to lead Italy, the eu-
rozone'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 mon-
etary policy for the 19 countries that
use the euro, with an economy worth
12 trillion euros ($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 re-
spect 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 on
Wednesday. “The same goes for (Ger-
man Chancellor) Angela Merkel and
(Chinese President) Xi Jinping.”

A seasoned treasury official who be-
came Italy’s and then Europe’s top
central banker, Draghi brings gravi-
tas, crisis management, and market
savvy to the job of governing Italy out
of a pandemic and the resulting eco- to become the main banking super- lusconi’s efforts at economic reform Draghi could succeed Mattarella as
nomic crisis. President Sergio Mat- visor after failing banks played a key faltered; Berlusconi resigned in No- president in just about a year, the
tarella tapped him to form a broad- role in the eurozone’s troubles. vember 2011 and he was replaced by chances are slim given the enormity
based government after squabbling technocrat Mario Monti. of the tasks facing Italy and the timing
among Italy's coalitions parties over His recent tenure leading the ECB, of the crisis.
the virus response led Premier Gi- ending Oct. 31, 2019, positions him Born in Rome, Draghi graduated
useppe Conte to resign. well to help Italy navigate its difficul- from La Sapienza University there Draghi comes with some baggage. As
ties and also some 200 billion euros with a degree in economics and a central banker involved in supervis-
Speaking Wednesday at the presiden- in EU recovery funds. earned his Ph.D in 1976 at the Mas- ing tough austerity policies imposed
tial palace in Rome, Draghi listed the sachusetts Institute of Technology, on some European countries during
priorities facing Italy: “overcoming If Italy needs to tap the ECB’s bond- where he studied under Nobel lau- the crisis, he has been viewed skep-
the pandemic, completing the vac- market backstop, which aims to keep reate Franco Modigliani. Among his tically in some corners as someone
cine campaign, offering responses to euro countries' sovereign borrow- fellow students at MIT was Ben Ber- who defers to financial interests. A
citizens’ daily problem, relaunch the ing costs from spiking to unafford- nanke, the future head of the Federal stint at investment bank Goldman
country.” able levels, there's no one better than Reserve. He taught at the University Sachs will only magnify any criticism.
Draghi: he oversaw the backstop’s of Florence, and also served as a top
Financial markets welcomed the design and unveiling in 2012. official at the World Bank, based in Few are the Italians who have been
prospect of a Draghi government. It- Washington. able to parlay success abroad into
aly’s borrowing costs on its debt, the He would also be intimately familiar success at home. Monti, a former EU
second-highest in relation to GDP in with the complexities of the Euro- Draghi served from 1991 to 2001 as commissioner, was widely credited
Europe, sank, while stocks rallied 2%. pean bailout fund created during the a top official at the Italian Treasury, with helping Italy recover from the
One financial analyst summed up the eurozone debt crisis. under governments with a range of 2011 debt crisis, but his legacy was
sentiment with the subject line: “We orientations, from conservative Ber- muddied when he formed his own
like Mario Draghi!” Draghi joined the ECB as its third lusconi to former communist Mas- party and ran in the subsequent na-
chief in 2011, just as Italy was en- simo D’Alema. He oversaw the priva- tional election.
Draghi is not afraid of venturing bold gulfed in a debt crisis. As ECB pres- tization of Italy’s state-owned indus-
solutions to big problems. When the ident-designate, Draghi and then- tries and helped Italy get its finances Any Draghi government is likely to
eurozone was facing a crisis of con- ECB head Jean-Claude Trichet inter- in shape to join the euro as a charter be short-lived. The current parlia-
fidence in 2012, he famously told a vened in Italian politics through an member in 1999. ment’s mandate extends for another
conference in London that the ECB August 2011 letter to then-Premier two years. But analysts say Draghi’s
would do “whatever it takes to pre- Silvio Berlusconi demanding reforms Many in Italy had hoped Draghi term might be even shorter.
serve the euro. And believe me, it will to cut the deficit, improve growth and would be available to take over
be enough.” That promise, backed deal with a financial markets crisis when President Sergio Mattarella’s “A very plausible scenario is that, af-
with new ECB policies, helped stabi- that threatened to break up the euro. term ends in 2022, unsullied by Ital- ter vaccinations are completed and
lize markets that threatened to break ian politics. The largely ceremonial the economy starts to recover, parties
up the euro. The ECB then started buying Italian role proves key in helping manage withdraw their support and ask for
bonds to stabilize the government’s Italy’s all-too-frequent political cri- new elections,” said the chief Ital-
He took a pragmatic approach during borrowing costs in what appeared ses, which require deft negotiations ian economist for Oxford Econom-
the financial crisis. He expanded the to be an unstated quid pro quo. The and unassailable knowledge of Italy’s ics, Nicola Nobile. That would most
range of the ECB's stimulus policies ECB denied there was any deal. The constitution and institutions. likely happen next spring, after a new
to include large-scale bond purchas- ECB bond purchases did not take president is appointed.
es. He also oversaw the ECB's move pressure off the government as Ber- While it cannot be ruled out that