“The Dragons Puzzle”. From the lira in danger to the ECB: what I know about the former governor


I don’t know how much I can add as an introduction to this book that you read willingly for the reconstruction it makes of its protagonist knowing how to grasp its essential features, if not confirm them, based on personal knowledge and common experiences that I have lived with him since the late 1980s, when we first met. And we met in Washington, where he was executive director of the World Bank and where I went several times for official meetings when I was treasury minister. Since then it has happened to spend time together, to exchange ideas and to find consonances. Then when, as Prime Minister in 1992, I found him next to the Treasury team, where he had in the meantime assumed responsibility for the general management that managed the public debt, it was truly a meeting; and realize that we understood each other on the fly.

To the Treasury

It is true what Marco Cecchini writes, Mario Draghi was not involved in all the decisions we made then. This does not mean that he and I did not hear each other, nor does he cancel his role on crucial issues such as that on the contraction (or not) of new loans in the weeks leading up to the devaluation of September. The United Kingdom hanged himself with his own hands, contracting a gigantic sterling debt in late August. On the same days, we rejected offers that were more than advantageous. In those times, and still seven years later, when I found myself Treasury Minister with him still in his place, I had the opportunity to experience his qualities, what I am calling here his essential traits, and the harmony that was between we.

It was difficult to see him perplexed, he always faced situations with confidence, I would say almost with detachment. Where did these ways come from? They came from the competence and use he made of them, always arriving prepared for the appointment with choices and facts. At that point he knew what needed to be done and he said it, he convinced the hesitants, imposing the superiority of his arguments. And it was in this that he identified his institutional duty, not in being at the service of a priori political choices. I was, in front of him, the political authority, but this never weighed on our relationships: we reasoned the same way, we played the same way, both were right who was right. And once you understood what you needed, what you needed was done. Without worries and without hesitation. It was thus, among other things, that, beyond his presence or not in the final decision-making seats, he was close to me and Piero Barucci in stopping in 1992 the design of the “superholding”, which would have blocked the privatization process in the bud of state holdings.

Mindful of all this, I was not at all surprised when, several years later, he made his famous exit on behalf of the European Central Bank, that whatever it takes which stopped the avalanche of markets, ready to hit the euro in a time of serious difficulty in the eurozone. I was not surprised, because it was clearly what he was convinced of and evidently convinced at that point if not all, the majority of the doubters on his board. And I was sure that he had done so not using the Napoleonic attitude of a military leader, but carefully prepared arguments on the adherence to the ECB’s mandate of measures, although interfering with financial and fiscal policy, when they were essential to guarantee stability and convergence to interest rates.

In Frankfurt

Let us not forget that, since then, the German Federal Constitutional Court has twice raised the question of the compatibility with the Treaty and with the competences of the Member States of the measures put in place before the European Court of Justice. whatever it takes (i.e. the so-called outright monetary transactions, however never put into practice), and then of the massif quantitative easing, which lasted continuously for months until December 2018 (and then resumed, to a more limited extent, in September 2019). Well, on both occasions the Court of Justice rejected the question and whoever reads the two decisions cannot fail to recognize in them the arguments that the Central Bank had come up with and that Mario Draghi had repeatedly firmly asserted: if a measure is monetary policy, and therefore the responsibility of the Bank, or economic or fiscal policy, and therefore the responsibility of the States, it cannot be decided on the basis of the area in which it falls, since the scope is in both the cases the same, that of the financial sense. It can only be decided on the basis of the ends it concretely pursues; and if the Bank adopts operations that contrast too low inflation and rates on securities that are divergent and insensitive to the reference rate, these transactions, also involving significant purchases of public securities (obviously on the secondary market), are included in monetary policy.

Civil servant

I have never spoken to Mario Draghi about these two sentences. But in reading them, and in weighing the arguments set out in them with a strict logic that in the end leaves no room for reply, I thought of him as their source before. He was certainly the first to convince himself that it was possible to bring such transactions back within the “limits of the mandate” of the Central Bank, so as to remove them from prejudicial criticisms that would have prevented them. And it was certainly he who first built the argumentative system that gave him the certainty of being right, and therefore of asserting what he needed at that moment. And what is needed – then as in the past – at that point is simply done. In short, in whatever it takes and in what followed, I did not find an unexpected lover of “it goes or breaks it”. I found the person I knew.

Before concluding, the author wonders what Draghi will do in the future and the question is first and foremost based on the expectations that have materialized in Italy of his availability to high public offices with us. The author knows that Draghi, always respectful of politics and well-able to negotiate with his exponents (the plot of his relations with Chancellor Merkel was decisive for passing, on the same board of the ECB, the quantitative easing), sees in it “essential traits” too different from his to think of being part of it. While aware that even among politicians there may be more than appreciable people, he considers the constraints and the necessary partisan inclinations of politics extraneous to his idea of ​​public mission and to the assessments and reasons that must inspire its exercise. However, it must be said that now, in Italy prostrated by the coronavirus, it would be difficult for anyone to leave Italy’s unheard appeal to her best children, to do whatever is useful and possible in any role. And it is also true, regardless of this, that what applies to the holders of government positions does not apply to the President of the Republic. Indeed, the latter generally comes from politics, but must immediately reorient himself towards the third party which is proper to the guarantee institutions; and that, although not the one Draghi is used to, it is certainly less distant from him political politique.

In the last words of the book, the author leaves the question rightly open.

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