When Mario Draghi became the top candidate to run the European Central Bank eight years ago, Germany’s best-selling tabloid pictured him wearing a spiked Prussian helmet and declared the Italian economist to be “rather German, indeed, a proper Prussian”.
A year later, the newspaper asked for its helmet back, complaining: “No more German money for bankrupt states, Herr Draghi.” The about-turn sums up the vexed relationship the ECB boss has had with Germany, where the same paper recently portrayed him as ” Count Draghila,” sucking money out of savers’ accounts through negative interest rates.
His relationship with financial markets has, however, generally been more positive. While there have been concerns about the damaging side-effects of ultra-aggressive monetary policy, many said the unflappable Italian – due to take his final press conference next week – did a decent job in tough circumstances. On his watch the European stock market rose about two-thirds, while strains in the periphery, as judged by a collapse in Italian government bond yields, were eased.
One highlight of Mr Draghi ‘s tenure was his declaration to do “whatever it takes” to preserve the euro in July 2012, as he grappled with a spiralling eurozone debt crisis.
“They were the right words at the right time, with massive effect,” recalled Franck Dixmier, global head of fixed income at Allianz Global Investors.
His unscripted comments – made during an event in London’s Lancaster House – were a classic Draghi move. Feeling cornered by soaring borrowing costs in many peripheral European countries and rising speculation about a eurozone break-up, he took the initiative with a bold promise, leaving the details to be ironed out later.
That style, which marked a clean break from his more cautious French predecessor, Jean-Claude Trichet, was evident from his very first public outing as ECB president in November 2011. “Not only did he immediately reverse the last rate hikes of Trichet, but there was such a change in tone,” said Carsten Brzeski, chief economist for Germany at ING.
Mr Trichet had tried to keep the Bundesbank on board by worrying about its antipathy towards debt and inflation, but Mr Draghi was less concerned with building a consensus and focused instead on ensuring the eurozone’s survival.
“You could tell it was . . . a new type of ECB,” said Iain Stealey, head of international fixed income at JPMorgan Asset Management in London. “They weren’t going to be fixated on inflation but looking at the bigger picture. His first job was to reverse the mistakes, as they turned out to be, of the previous regime.”
Mr Stealey’s team had stopped buying Italian or Spanish debt by 2012 and was even talking to investors about whether those countries’ bonds should be excluded from major benchmarks. The market did not grasp the shift that Mr Draghi’s arrival represented straightaway. “Once you got rid of the idea that the eurozone was breaking up, it was pretty much a one-way trade from 2012 to 2015,” Mr Stealey said.
Luca Paolini, chief strategist at Pictet Asset Management, said the outgoing ECB boss’s defining characteristic has been calmness in the face of criticism, notably when Bundesbank chief Jens Weidmann gave testimony against ECB policy to the German constitutional court in late 2012, or when Wolfgang Schäuble blamed Mr Draghi for the rise of the far-right AfD party in the German elections of early 2016.
The ECB president even kept his cool when a young protester jumped up on his desk during a press conference in 2015 and threw confetti over him. “He always gave the impression in a very difficult situation he was looking at the numbers and not panicking,” said Mr Paolini. “Having someone with these political skills was incredibly important for the survival of the euro.”
Things did not always go smoothly. Mis-steps included the ECB’s support for a bailout of Cypriot banks that imposed losses on large depositors and sent tremors through the banking system. The ECB also suspended a waiver for Greek banks that cut them off from vital funding – only to restore it a few months later.
On occasion, Mr Draghi has disappointed markets, such as when the ECB cut interest rates to minus 0.3 per cent and extended its bond-buying programme by six months in 2015 – underwhelming investors and sending the euro up sharply. Sushil Wadhwani, chief investment officer at investment firm QMA Wadhwani, said the ECB was too slow to start buying bonds in 2015, when other central banks had been doing so for years.
As he nears the end of his time at the ECB, some critics say Mr Draghi has been too dogmatic, leaving a tricky situation for Christine Lagarde, his successor.
The monetary-easing measures unveiled in September, for example – including a restart of the €2.6tn QE programme after only a 10-month hiatus – sparked a fierce backlash from other members of the ECB governing council, and not only the Germans.
Lucrezia Reichlin, professor of economics at the London Business School and former head of research at the ECB under Mr Draghi, said: “I’m not entirely sure that Draghi did the right thing this time as it leaves a very divided council for Lagarde to deal with.”