New ECB Boss Mario Draghi Knows Crisis Management
The next boss of the European Central Bank, Italy’s Mario Draghi, knows crisis management from his days in Italy. Fortunately.
By default (or, rather, a series of near defaults), the president of the European Central Bank is fast becoming the most powerful person in Europe. Mario Draghi, who relieves Jean-Claude Trichet at the ECB as the euro zones top banker in November, proved at Italys central bank and Treasury that he has two qualities essential to running a central bank with one currency and 17 countries, five or more of them problem debtors: flexibility and temerity.
In August, Trichet and Draghi, acting as Italys central bank chief, sent Italian Prime Minister Silvio Berlusconi a letter stating that the ECB would help Rome by buying stressed Italian sovereign bonds exhibiting flexibility, while reversing a dangerous spike in bond yields. At the same time, Draghi displayed temerity by endorsing the ECBs demand that Italy meet stringent fiscal conditions that included balancing its budget a year ahead of schedule. Even cheekier, the joint missive proposed that Italy privatize utilities and cut public sector wages and pensions.....