Mario Draghi ends leadership with European Central Bank

Mario Draghi led his final meeting with the European Central Bank Thursday as it continued to wrestle with a sluggish economy.

Mario Draghi, president of the European Central Bank, arrives for a press conference in Germany on Thursday. Photo by Ronald Wittek

The bank voted not to move interest rates but remained split over whether to reopen a stimulus program. Draghi said in September the bank could push interest rates further into the negative and continue “quantitative easing” to help the economy.

The ECB’s decision kept the ECB’s benchmark borrowing rate at zero, while leaving banks with interest rates of -0.5 percent. The bank agreed to restart its stimulus program on Nov. 1, saying it will buy more than 20 billion euros worth of bonds each month until growth and inflation normalize.

Draghi’s eight years as head of the ECB were marked with successes and failures, announcing a rate cut of 25 basis points in his first two months and famously vowing in July 2012 to do “whatever it takes” to save the Euro.

“He arrived to the recession and ballooning peripheral spreads,” Kit Juckes, of French investment bank Societe General, said. “He delivered a de facto guarantee to the Eurozone bond markets that dismayed some of his colleagues but which has removed one major structural failing of the single currency system.

“He revived growth without reviving inflation much, delivering an average of 1.2 percent real GDP growth and 1.2 percent CPI inflation over the course of his term,” Juckes added.

Nick Wall, of Merian Global Investor, said Draghi’s inflation goals, though, were not met during his tenure and Europe still faces challenging demographic trends.
“Draghi’s now famous ‘whatever it takes’ moment saved the Eurozone by finally allowing the ECB to become a credible lender of last resort, a key facet for any central bank,” Wall said. “Sovereign spreads have converged ever since, allowing for the odd political wobble, with Draghi’s ECB loaning money to banks, buying up sovereign and corporate debt, and taking interest rates below zero.

“His legacy is the survival of the euro during its toughest test to date using methods that were previously anathema to a central bank steeped in the traditions of the Bundesbank,” he added.

ByClyde Hughes