05/04/2012 ECB : Mario Draghi, the almost perfect candidate

On Tuesday June 14th, MEPs who are members of the Economic and Monetary Affairs Committee attended a hearing of Mario Draghi, tipped to become the next president of the European Central Bank. Frenchman, Jean-Claude Trichet’s tenure ends in October and as the 27 Member States’ finance ministers have already given their support, Draghi came looking for an endorsement from Parliament.

An experienced candidate...

The Italian had to give his opinion to the ECON committee on the main issues facing the ECB, primarily the Greek crisis. On this issue, he declared himself optimistic despite the seriousness of the situation. He dismissed the idea of a sovereign default saying that “the costs will outweigh the benefits”. He also believes that “delivering the economic programme remains, with all probability, the least costly way forward for all parties involved”.

The European Central Bank manages the EU’s monetary policy (in particular, the single currency and interest rates) and is also responsible for creating and implementing its economic policy.

Deftly dovetailing with the European Parliament’s position, Mario Draghi declared himself in favour of automatic sanctions for breaches of the stability pact. This standpoint should reassure German Chancellor Angela Merkel who had until recently supported the Bank of Italy governor but was starting to express doubts about appointing someone from “Club Med”.

At several points, Draghi highlighted the importance of the fight against inflation, noting that price stability is written into the Maastricht Treaty which created the forerunner of the ECB. While pleased with the work of his predecessors in this respect, he said that “maintaining price stability on a lasting basis always remains a challenge” and that “not even a sovereign debt crisis could ever make the ECB deviate from the price stability objective."

...with a dark past

Considering his career and his declarations, Mario Draghi seems to be a model candidate... until we learn that from 2002 to 2005, the Italian was vice-president and managing director of Goldman Sachs. This is the bank that is infamous in Europe for having advised Greece on how to use derivative products to hide their budget deficits. At this very moment, the candidate for presidency of the ECB was responsible for managing sovereign debt.
Goldman Sachs is also noteworthy for its close ties to the corridors of power, not only in the US but in Europe too e.g. Peter Sutherland, former European Commissioner for Competition is currently President of Goldman Sachs; Mario Monti, former European Commissioner for Internal Markets and, later, Competition, is one of their advisors; Romano Prodi, former Commission President and Prime Minister of Italy was also an advisor at the bank.
In a newspaper column, MEPs Pervenche Bérès and Pascal Canfin stated that “Otmar Issing, former ECB board member, became an advisor at the bank and mixed with former members of the European Parliament’s Economic and Monetary Affairs Committee Secretariat recruited by Goldman Sachs to try to influence MEPs. 

Some MEPs therefore feel there is reason to doubt the capacity of Mario Draghi to regulate or ban practices that he himself has used, and that his former employer actually invented. Furthermore, he has never openly criticised these practices. Sceptics could not have been reassured by Draghi’s attempt to obscure the responsibilities he had at Goldman Sachs during the first part of the hearing.

In answer to questions, he denied being linked to the banks’ activities with governments, stressing that the measures he has taken since regarding the banking sector and against the build up of risk proves that he would not be in the pocket of the financial industry.

Sharon Bowles, president of the committee, expressed her enthusiasm after the hearing and stated her intention to give a favourable opinion to the Parliament who are due to vote at the next plenary on Mario Draghi’s candidacy.

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