One cannot fail to act when a public and political mandate (as received) by politics must be respected. Don’t act not a decision. But it takes knowledge, courage and humility. Thus Mario Draghi, president of the ECB, outlined the profile of the political decision maker (the policy maker) in the honorary degree in economics conferred on him on Friday 11 October by the Catholic University of Milan. Draghi claims all the choices made to face the crisis. But in his speech, echoes of response are perceived to those who, within the ECB, like the governors of Germany, Austria, Holland and France, openly contested the decision to cut rates again and to restart the purchase of securities, the Quantitative Easing. And there is also a reference, yet another, to the countries that do not proceed with structural reforms: governments that have been able to distinguish the interests constituted by the public interest, looking at the large majority that would have benefited from the reforms, have produced positive results that are today under the eyes of all.
Eight years at the helm of the ECB
Draghi traces a path of eight years at the helm of the ECB, now that his mandate is close to expiry. And he focuses on the unprecedented set of measures designed in 2014-15, with the introduction of negative interest rates and the purchase of government bonds, to avoid the incipient drift towards deflation. At the time, many policy makers, myself included, questioned how these measures could work in the euro area. Interest rates had never been pushed into the negative zone in a large economy; we did not know the effects of government bond purchases in a bank-based economy such as the euro area. We entered terra incognita, where by definition the effects of our actions could not be predicted with certainty. Yet – said Draghi in his lectio magistralis – the decisions were nevertheless guided by the feedback we had and by an overall assessment of the risks and options that can be used to respond to them. The evidence was then unambiguous: without resorting to unconventional measures, the ECB would not have been able to fulfill its mandate to protect price stability.
Whatever It Takes
The second lesson to be drawn from that experience is courage: speaking of the Whatever It Takes and then of the OMT bond purchase plan – or the shield for the euro – the courage needed to act came from the belief that the impending risks would be far greater if we hadn’t done anything, Draghi pointed out. In this case, we would simply have failed to fulfill our mandate and potentially jeopardized the integrity of the currency we were tasked with preserving. It made the decision we made inevitable; it was the only one possible for a responsible policy maker. In retrospect, euro area governments did not lack courage; they knew how to take the right steps in crucial moments.
Resigning is not an acceptable option
Then there is the humility of the role, which arises from the office which has a political nature because it comes from democratically elected bodies: The political nature of our mandate has some essential implications: we do not have the freedom to decide whether we should do what is necessary to do fulfill our mandate. our duty to do so. Resigning ourselves to failing you is not an acceptable option if we have the tools to fulfill our responsibilities. At the same time, the mandate implies a permanent obligation to act strictly within the limits of the law.
The support of Greece was substantial
This happened, Draghi recalled, in Greece in 2015 with the help given to the banks. We followed a path that fulfilled the duties of the mandate, staying strictly within the limits of the law. The support given to Greece was substantial: at its peak, the sum of the loans granted by the ECB and the Bank of Greece to the country’s banks reached 127 billion, corresponding to 71% of GDP. But the funding was never unconditional or unlimited. Adherence to a recovery program agreed with the Eurogroup guaranteed the quality of the collateral, the government bonds given by the Greek banks as collateral for their financing. Furthermore, various clauses avoided any monetary financing of the public budget. The ECB thus kept itself within the limits of its mandate. Our choice turned out to be right, both for Greece and for Europe, even if the price for Greek citizens was high. Thanks to Europe’s solidarity, to the courage and commitment of successive Greek governments, a way out of the crisis was found.
The best future for Europe
Draghi’s conclusion of a better future for Europe and the Euro: The creation of the European Union, the introduction of the euro and the activities of the ECB have encountered many obstacles and faced much criticism. Nonetheless, they proved their worth; today it is those who doubted who are questioned. This reflects the normal development of monetary unions, which is slow, non-linear, bumpy. The United States, for example, did not have a central bank for more than 130 years after its founding; the federal budget only took on a real role in the 1930s. Today few would think of going back. It is essential for the development of a monetary union that its citizens believe in the union and take it anyway, even critically, as a reference rather than considering all the problems by looking at the horizon of their particular point of view. It seems to me that the last elections for the European Parliament, perhaps the first mainly focused on European issues, have confirmed this. The majority of elected parliamentarians were in favor of Europe.
The EU can last and prosper
For this reason, I am optimistic about the future of Europe. I think that over time being part of the EU and monetary union has become normal for most citizens. The euro more popular than ever; support for the EU touches the highest values recorded since the start of the crisis. In debates about the future of Europe, there is less and less discussion about whether its existence makes sense and much more about the best way forward. On this basis, our Union can last and thrive.
Why an honorary degree from an economics professor?
in the way in which it has led the European Central Bank into the storm that the single currency has experienced in recent years is its most significant contribution, the rector of Cattolica, Franco Anelli, said introducing the ceremony. for this reason it was decided to confer the honor in economics on an economics professor: The presidency of Mario Draghi has undoubtedly left its mark, and will certainly be the object of analysis for a long time in the future, because it was emblematic of the weight and at the same time of recognized limits of monetary policy instruments. If the honorary degree is often the recognition of the scientific and cultural value, and exemplary, of a practical experience – continued Anelli – the title we confer today has a sense of circularity, because it recognizes the action of an economist in the exercise a high scientific value and a sure academic merit. Our Faculty therefore wanted to honor a scholar as the protagonist of an economy “in action”, not just “in the books”.
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