Cause and Effect in European Politics and Law

'Super Mario' Takes Over in Frankfurt

Ralitsa Kovacheva, November 1, 2011

As of 1 November Маrio Draghi is the new president of the European Central Bank. The nomination of the Italian central banker for the post in June caused surprise because it was expected the next president of the ECB to be a German. But after the resignation of former German central banker Axel Weber, Mario Draghi remained the only favourite to succeed the French Jean-Claude Trichet. Then the Germans hesitated for long before supporting him and the media said the only problem in an otherwise respectable Draghi's bid was that he was Italian. For the Italians inflation is a way of life, like the tomato sauce is for the pasta, the German magazine Bild wrote.

Mario Draghi's CV is impeccable, except for his several years being vice president of the Goldman Sachs investment bank, which provoked doubts whether he was involved or was aware of what happened to the Greek debt. Otherwise, he is the first Italian Ph.D. in economics from the Massachusetts Institute of Technology, where his mentors were Nobel laureate Franco Modigliani and Stanley Fischer, the current Governor of the Bank of Israel. He worked as executive director of the World Bank and is chairing the global Financial Stability Board. He was the one who is attributed the merit of saving Italy from its own banking crisis in the 1990s being then director general of the Italian Treasury, and of restoring the image of the Italian central bank, which he took over in 2006.

Despite the initial doubts, Mario Draghi was able to quickly win the German sympathies, calling for fiscal discipline and national policies in support for growth and opposing the Eurobonds. As The Financial Times predicted some time ago, he is successfully defending his image of "a monetary policy hawk and fiscal hardliner."

Mr Draghi is taking the post at a crucial time when the EU argues that it has found "comprehensive solutions" to the crisis, but the future role of the ECB in the ongoing rescue of the euro area is still questionable. Although the options currently being discussed for increasing the euro rescue fund exclude the ECB participation, because of opposition from Germany and the bank itself, many believe that ultimately the ECB is only able to pull Europe out of crisis. In this context, Mario Draghi will have to assert the political independence of the ECB, which has been fiercely proclaimed by his predecessor Mr Trichet, although at times he sounded not so convincing.

And most of all, Mario Draghi may be faced with the need to save his own country. Italy seems increasingly a potential candidate for the next rescue operation after the financial markets took aim at Silvio Berlusconi, doubting that his government may conduct the necessary reforms. Similar criticism has been repeatedly expressed by Mario Draghi himself as an Italian central banker.

It is obvious that in the next eight years Mario Draghi will have to demonstrate both muscles and flexibility, as appropriate, to protect the nickname given to him by the media after the name of a character from a popular computer game - Super Mario.