He may prove to be the perfect addition to a large, unwieldy group of 17 central bankers from different countries that has been struggling to formulate a coherent European rate policy.
Papademos, a Ph.D. from MIT who taught at Columbia and served as a visiting senior economist at the Federal Reserve Bank of Boston, isn’t easily categorized. He counts among his mentors the neo-Keynesian MIT economist Franco Modigliani as well as the neoliberal Columbia economist Robert Mundell. He’s also close to former Bundesbanker and ECB chief economist Otmar Issing, and to Tommaso Padoa-Schioppa, the former Banca d’Italia deputy director general who heads international relations for the ECB. Insiders say Issing and Padoa-Schioppa lead opposing hard- and soft-money factions on the governing council. Some see Papademos as a natural force for consensus. “When there are major divisions, Papademos is actually likely to serve as a bridge between factions,” says Kevin Gaynor, head of European economic research at UBS Warburg in London.
Papademos, who describes his own monetary approach as “eclectic,” plays down the need for such a mediating role. “The current size of the governing council does not create any problems relating to the formulation of monetary policy,” he says, diplomatically. His record is undeniably moderate. Although he cranked Greek interest rates sky-high in the latter half of the ‘90s, he never choked off economic growth. “Papademos always argued for a gradualist approach to bringing down inflation, rather than a cold turkey solution that could have sent the economy into recession,” says Gaynor. Adds Papademos, “I try to differentiate between an approach based on theory and an approach based on the way an economy actually works.”
