Tuesday, a new player moves into the top rung of European officials dealing with the European financial crisis.
Mario Draghi is not “new” to the European scene, but on Tuesday he takes over as the president of the European Central Bank replacing Jean-Claude Trichet, and so is “new” in this important position.
A new head of a central bank is generally “known” but, not having ever been in the position before, he (when are we going to get a woman head of a central bank?) is untested and it is uncertain how he will really act under pressure.
There is an interesting article in the Sunday New York Times about Mr. Draghi titled “Can Super Mario Save the Day for Europe?” that gives us some background on this “new” leader: (http://www.nytimes.com/2011/10/30/business/mario-draghi-into-the-eye-of-europes-financial-storm.html?_r=1&ref=business)
In this article Mr. Draghi is cited as vowing “that there would be no surprises on his watch.”
Vintage Draghi seems to provide a “performance so subtle and politic that it seem(s) to please everyone. Which, it turns out, is the Draghi way: people often seem to see what they want to see in him.”
Yet, Mr. Draghi seems to produce. Although having sterling academic credentials, he in not some academic that gained his laurels by writing about historical events. He has actually been in “real” administrative positions that have required tough decisions to be made and leadership to be shown. In these positions he has shown well.
He has been in the private sector and, although this is the place where people seem to question some of what he has done, he performed well in his role as a vice chairman of Goldman Sachs in Europe.
He seems to be a person that let’s his actions define his positions and does not get all “hung up” about how best to communicate with investors and markets as does the current Federal Reserve System.
I particularly like the description of Mr. Draghi given by Francesco Giavazzi, who worked for Mr. Draghi at the Italian treasury. Mr. Giavazzi, a classmate of his at M. I. T., states that Draghi learned a very important lesson in his efforts to bring Italy’s fiscal problems under control so that Italy could join the new common monetary zone that was being created for Europe. At that time Italy was dealing with “high levels of debt” and “runaway deficits” which led to Italy being expelled from the European Exchange Rate Mechanism, the European currency system that preceded the formation of the eurozone.
The efforts of Mr. Draghi and his team brought things under control so that Italy avoided bankruptcy and could become a founding member of the new currency union.
Mr. Giavazzi states that the lesson that Mr. Draghi learned through this experience “is that rather than waiting for help, you need to regain the confidence of the markets through your own actions, and that if you do not do the right thing, no outside help is enough—you will have a solvency problem.”
Encouraging.
Furthermore, people that have worked with Mr. Draghi claim that even though he is an economist he “put aside models and theories for what actually works.” Mr. Draghi seems to be a pragmatist.
So, Mr. Draghi appears to be an experienced, pragmatic leader who is confident enough in his abilities that he can let his actions speak for themselves.
Sounds too good to be true!
Best wishes, Mr. Draghi, we all wish you the greatest success!
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