Economist and diplomat John Kenneth Galbraith maintained that ‘in central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.’ Certainly, there can be no arguing with the first part of his premise. However, in this current economic crisis, people are not only afraid for their future (and that of their children and grandchildren) but also angry at the financiers and politicians whom they perceive to have forced austerity and risked financial ruin. Therefore, bankers can no longer be simply suave and well-connected. This is especially the case for heads of international financial institutions, who are called upon daily to make decisions that not only affect their investors but the lives of everyday people. The head of the European Central Bank (ECB) has such a responsibility for the European Union, and the heads of the International Monetary Fund (IMF) and World Bank (WB) have worldwide responsibility.
On November 1, 2011, Italian economist and banker Mario Draghi became the third president of the Frankfurt-based ECB, a job he will hold until October 31, 2019. Founded on June 1, 1998, the ECB’s mandate was a tall order indeed: to replace the currencies of a group of European sovereign states with a single currency and to devise a monetary policy for the nascent euro zone. The ECB was also charged with establishing the European system of central banks, the institutional framework comprising the ECB and the central banks of all the EU member states. Today, the ECB is not without its critics, who consider it too undemocratic (the appointed board members are difficult to remove and its powers are considerable) despite its important role in economic development. It determines interest rates that affect improvements in living standards, the level of unemployment and the amount people pay for their credit and their mortgages. Within this framework, the president’s role is both prestigious and high-pressure. He or she often has to walk a tight-rope, using acumen and negotiating skills, to persuade and convince the other powerful players involved in the process like the national central banks, the governments of the member states, the European Commission and the G20 that there is wisdom in the policy decisions that the ECB makes to ensure the survival of the euro and stability and growth in the region.
Born in Rome, on September 3, 1947, Draghi, lost his banker father in his mid-teens and his mother shortly afterwards, making him the head of the family for his younger sister, Andreina (an art historian), and brother, Marcello (a businessman). He graduated in economics from La Sapienza University of Rome under the supervision of Federico Caffè, who encouraged him to continue his studies abroad. On the advice of the Nobel Prize–winning economist Franco Modigliani, he chose the Massachusetts Institute of Technology and became, in 1976, the first Italian to take a PhD in economics there. On his return to Italy, he went into academia, teaching first at the University of Trento from 1975 to 1978, then at the universities of Padua and Venice and, finally, from 1981 to 1991, as a full professor at the University of Florence. In the meantime, from 1984 until 1990, he was also the Italian executive director at the World Bank.
In 1991, the Andreotti government appointed him director general of the Italian Treasury, an office he held throughout the life-span of nine different governments until he was replaced by the Berlusconi government in 2001. He returned to America as a fellow at the Institute of Politics at the John F. Kennedy School of Government of Harvard University, but in 2001, he was quickly snapped up by one of the oldest and biggest financial institutions in the world, the Goldman Sachs Group, where he was appointed vice chairman and managing director of Goldman Sachs International and a member of the group’s management committee. From 2006 until just before his appointment to the ECB in 2011, he was governor of the Bank of Italy and sat on the boards of the Bank for International Settlements, the International Bank for Reconstruction and Development and the Asian Development Bank.
A dark, pleasant-looking man, Draghi does not enjoy a ‘yuppie’ lifestyle but prefers to keep his family life private. Draghi lives with his patrician wife, Serena, who is a descendant of Bianca Cappello, the wife of the grand duke of Tuscany, Francesco de’ Medici. The couple have two children, Federica, a biologist, the mother of their granddaughter and Giacomo, a trader with Morgan Stanley. He plays tennis and golf and is frequently seen in the company of his beloved dog, a Hungarian hound. He is also a fan of the AS Roma football team.
Draghi’s leadership of the ECB has been judged positively in the financial press and by the markets. In December 2012, he acted quickly when the ECB pumped 489 billion euro in three-year loans into the euro zone’s banking system, triggering a significant improvement in some of the region’s government bond markets, thus avoiding what he said could have been ‘a major, major credit crunch.’ Again in February 2012, he initiated something called a long-term refinancing operation, a round of larger ECB loans to European banks.
When asked in an interview with the German magazine Bild, in March 2012, whether the crisis was over, Draghi replied: ‘The worst is over, but there are still risks. The situation is stabilising… It is now up to the governments. They must make the euro area crisis-proof in a sustainable manner.’
We, as European citizens, can only hope and pray they take his advice.