In Europe, high hopes for high-energy Italian Mario Draghi at head of ECB

By Neil Irwin, Tuesday, June 28, 8:50 AM
FRANKFURT, Germany — The future of Europe will soon be in the hands of a dapper, 63-year-old Italian economist with a name reminiscent of a James Bond villain and with long experience in the delicate art of economic diplomacy.

Mario Draghi is set to take office as president of the European Central Bank in November, making him, along with the Federal Reserve’s Ben S. Bernanke, one of the world’s two most powerful central bankers. He is inheriting an extraordinarily difficult situation, taking control in the midst of a debt crisis, with little time to learn on the job.

The European media refers to Draghi as “Super Mario” for his energetic style. The question is whether he can live up to the nickname.

The core of his challenge is this basic impasse: Greece, one of the 17 countries that use the euro currency, is essentially insolvent, paying its debts only with the help of bailouts, and Portugal and Ireland are in dire straits as well. The ECB has declared it unfathomable for one of its member nations to default on its debts, a position Draghi has echoed. Yet the willingness of the governments of stronger European nations to continue with bailouts may be reaching a breaking point.

Draghi is no stranger to the issues in play. He has been leading the Italian Central Bank through the crisis, and thus has had a seat at the table on major ECB decisions. He also is chairman of the Financial Stability Board, a group of the world’s top central bankers and other financial officials that aims to coordinate global efforts to rein in risks to stability. Perhaps an even more relevant qualification: He was head of the Italian Treasury in the 1990s, when the country faced the risk of defaulting in a crisis of its own, and knows the pressures that the leaders of troubled European nations are coming under.

Those crisis-management skills will be tested at a moment of a shake-up among those addressing the European debt crisis. The eight-year term of the current ECB president, Jean-Claude Trichet, will come to an end Oct. 31. The politically connected Dominique Strauss-Kahn has resigned as head of the International Monetary Fund to fight sexual assault charges in New York. His likely replacement, Christine Lagarde, is currently the French finance minister.

Draghi has won respect among central bankers on both sides of the Atlantic, who view him as a thoughtful participant in international discussions with a knack for guiding groups toward agreement. He helped bring officials from emerging nations such as China and India into discussions on financial policy, while navigating differences between the more traditional powers of the United States, Japan and Europe.

“He has done a very good job focusing on getting consensus around good policy from a disparate group of people and not letting disagreements cause everything to lock up and slow down,” said Donald Kohn, a senior fellow at the Brookings Institution who was the No. 2 official at the Fed until last year. “They have very serious problems in Europe right now, and I can’t think of a better person to deal with them.”